KOSPI's 19% record rally today post month-long meltdown; what's behind the trend reversal 

South Korea's Kospi nearly reversed a month long trend of losses on Friday when the index surged nearly 19% on the back of a rebound in heavyweights Samsung and SK Hynix. Before today's recovery, the index had crashed 40% from its peak of 9,385 reached on June 19 this year. Amid the stellar rally today, the beaten down index is still trading with a loss of 22% in a month. The benchmark index had plunged 17% over the previous three trading sessions as investors grew increasingly concerned about rising debt at the world's largest technology companies and intensifying competitive pressures from Chinese rivals.

The sharp decline was further amplified by the unwinding of heavily leveraged positions, triggering widespread selling across the technology sector. The correction came despite strong quarterly earnings from Samsung Electronics and SK Hynix earlier in the week, as broader concerns over valuations and financial leverage overshadowed robust corporate performance.

Meanwhile, Kospi reached a high of 6,630 today, rising 19%- its largest one day jump-against the previous close of 5,593.

According to a Bloomberg report, foreign inflows into the Kospi surpassed $5 billion in net buying on Friday, which pushed the South Korean index higher.

The rally was also driven by a strong overnight advance in US technology stocks after better-than-expected earnings from Microsoft, Amazon and Meta reaffirmed investor confidence that spending on artificial intelligence infrastructure remains on a solid growth trajectory.

Investor sentiment received an additional boost after SK Group Chairman Chey Tae-won revealed that he had purchased shares of SK Hynix, a move widely seen as a vote of confidence in the world's second-largest memory chipmaker and its long-term growth prospects.

Shares of SK Hynix, the korean chipmaker surged 30% to 1,718,000 korean won against the previous close of 1,322,000 korean won. On similar lines, shares of another heavyweight Samsung zoomed 29% to 267,000 Korean won against the previous close of 207,000 Korean won.

Another factor, which led to the stellar rally was the government revealing its plans to infuse around $13.9 billion into its sovereign wealth fund for strategic investments in AI.

Both stocks account for more than half of weightage on Kospi.