South Korea's Kospi jumped 4.39% on Tuesday to close at 5,239.13 as a rally in U.S. chip stocks and a slide in oil prices pulled foreign investors back into Seoul. The index rose 220.28 points and touched 5,300.92 during the session, according to Yonhap figures carried by Korea JoongAng Daily. SK hynix climbed 6.69% and Samsung Electronics 4.74%.

For investors in Asia, the move matters because it came off a deep low. The Kospi plunged 6.02% on Nov. 6 to 5,059.69 in a broad selloff in chip stocks, then slipped another 0.81% on Monday to 5,018.85, its lowest close since Feb. 2, Korea JoongAng Daily reported. Tuesday's bounce recovered most of Friday's loss in a single session.

Sidecar triggered as Kospi opens 4.55% higher

The rally was strong from the first minute. The Kospi opened 4.55% higher, and the Korea Exchange activated a buy-side sidecar at 9:06 a.m., halting program trading in Kospi-listed shares for five minutes, Yonhap reported. The mechanism kicks in when Kospi 200 futures rise 5% or more for at least one minute. By 9:10 a.m. the index was up 4.78% at 5,258.86, before giving back a little of that ground into the close.

The smaller Kosdaq rose 4.48% to 667.61, with its own buy-side sidecar triggered at 9:10 a.m., according to The Korea Times.

Breadth was wide. Gainers outnumbered decliners 714 to 174 on the main board, on turnover of 16.2 trillion won ($12.1 billion), Korea JoongAng Daily reported.

The catalysts came from abroad. U.S. President Donald Trump signaled overnight that further military strikes against Iran were not needed for now, and West Texas Intermediate crude futures fell below $87 a barrel, The Korea Times reported. On Wall Street, the Philadelphia Semiconductor Index rose about 6.9%, even as Nvidia fell 4.2% after its board moved to open a probe into Chief Executive Jensen Huang, according to Yonhap.

SK hynix, Samsung and power equipment lead the rebound

Chip and AI supply-chain names did most of the lifting. Beyond the two memory makers, Samsung Electro-Mechanics gained 4.63% and SK Square, the holding company that controls SK hynix, rose 5.26%, according to Yonhap.

Power equipment makers, which have traded as a bet on data center construction, posted some of the largest moves. Hyosung Heavy Industries rose 12.72%, HD Hyundai Electric 10.67% and LS Electric 8.33%, The Korea Times reported. Airlines rallied on cheaper fuel: Korean Air gained 11.51% and Asiana Airlines 11.68%.

A Kiwoom Securities analyst, Han Ji-young, told The Korea Times that worries about the AI industry and doubts about chip earnings were already "largely priced into stocks." A Mirae Asset Securities analyst, Kim Seok-hwan, tied the gain to a second straight day of advances in U.S. semiconductor shares, according to Yonhap.

Foreign investors buy, retail investors sell

The flow data marked a change in direction. Foreign investors were net buyers for the first time in eight trading sessions, The Korea Times reported, putting their purchases at 353.2 billion won. Yonhap, via Korea JoongAng Daily, put the figure at 365.9 billion won. Institutions bought roughly 490 billion won on both counts. Individuals sold about 1.3 trillion won.

Retail selling is worth watching. Margin loans outstanding exceeded 28 trillion won as of last Thursday, 1.8 times the level at the end of 2024, Korea JoongAng Daily reported. Regulators have suspended the 140% collateral requirement for brokerage margin loans from Monday through Jan. 31 to slow forced selling, a step covered in our report on the margin loan waiver for Kospi investors. Mirae Asset Securities and KB Securities have lowered their maintenance ratio to 130%.

The won firmed alongside equities, closing at 1,337.5 per dollar in Seoul, 9.6 won stronger than the prior session, according to The Korea Times. Government bonds also gained: the three-year yield fell 0.6 basis point to 3.633% and the five-year yield fell 1.3 basis points to 3.718%, Yonhap reported.

The rebound held, narrowly, into Wednesday. Despite hotter-than-expected U.S. consumer price data overnight that revived concern about further Federal Reserve tightening, the Kospi recovered from a 0.56% lower open and stood 0.68% higher at 5,274.81 as of 11:20 a.m., Yonhap reported. SK hynix added 2.06% and Samsung Electronics 0.9%. Defense shares jumped, with Korea Aerospace Industries up 7.02% and LIG Defense & Aerospace up 7.96%, while Hanjin KAL, the parent of Korean Air, fell 14.23%.

Earlier this month, chip shares in Seoul swung sharply on concerns about U.S. AI regulation. The next test is whether foreign buying lasts beyond one session: by The Korea Times count, overseas funds had been net sellers for seven straight sessions before Tuesday, and the Kospi's 5,000 line, which held by 18.85 points on Monday, remains the level traders are watching.