KOSPI swings 4% from low to lead Asian equity rebound

South Korea's KOSPI reversed from a 3% loss to a 1% gain on Friday, leading a broad Asian equity rebound as short-covering and dip-buying swept regional markets after a week of semiconductor-driven volatility. Nasdaq 100 futures rose 0.4% in pre-market trading, suggesting potential follow-through in US markets.

The KOSPI had triggered circuit breakers twice in the prior week as concentrated selling in semiconductor heavyweights Samsung Electronics and SK Hynix drove each stock down about 12%, according to market data. The VKOSPI surged to around 93 on June 26 — a level approaching panic territory, option market data showed — before the index staged its Friday reversal as oversold conditions drew buyers. The sharp decline had been exacerbated by the US Department of Commerce's move to block circumvention routes for Nvidia Corp.'s China exports, which rippled through the global semiconductor supply chain.

Japan's Nikkei 225 staged an even sharper recovery, climbing 4.61%, or 3,191 points, to close at 72,366 on Friday after touching a weekly low of 69,788 on Wednesday. The rebound tracked a recovery in US semiconductor stocks on Thursday, though the Philadelphia Semiconductor Index fell another 5.29% in Friday's US session, highlighting the fragility of the turnaround. Kioxia Holdings Corp. recovered from a 12% intraday drop to trade near flat, reflecting the whipsaw dynamics in chip-related names. Mainland Chinese and Hong Kong stocks also retreated on Friday as profit-taking followed earlier gains.

The option market had been flashing warning signals throughout the week. At Micron Technology Inc., implied volatility reached 92% with put demand concentrated at the $675 and $1,200 strikes, reflecting event risk ahead of the July 2 earnings report and vigilance regarding the Chinese CXMT supply cycle, according to option market data. Lam Research Corp. saw implied volatility hit 81% as downside hedges accumulated, suggesting the KOSPI's semiconductor selling was spreading to the manufacturing equipment sector. In contrast, Intel Corp. saw abnormal call volume with a volume-to-open interest ratio of 400% to 450%, indicating some investors were betting on a selective rebound in chip names.

The weekly selloff was compounded by macro headwinds: the US May PCE price index hit a three-year high of 4.1% year-over-year, with core PCE at 3.4%, reinforcing expectations that the Federal Reserve could resume rate hikes as soon as September. Treasury Secretary Scott Bessent said on CNBC that "the President has 100% confidence in Warsh's judgment," citing the Greenspan-era precedent of a single small rate hike not interrupting expansion. The US 10-year Treasury yield fell 14 basis points on the week to 4.37%, while the dollar held steady above 101.36 on the DXY index, with USD/JPY trading at 161.68. WTI crude oil fell about 8% for the week to $70.24 as geopolitical risks receded following a US-Iran ceasefire agreement.

The rebound faces a critical test next week, with the US ISM Manufacturing PMI on July 1 and the June employment report on July 2 — both of which could either validate the dip-buying thesis or reignite selling if they reinforce the hawkish repricing in rates. For Asian markets, the sustainability of the recovery hinges on whether semiconductor names can stabilize after a week that saw the SOX index fall 5.29% on Friday alone, leaving the KOSPI and Nikkei vulnerable to another leg lower if US tech fails to hold its Thursday bounce.

This article is for informational purposes only and does not constitute investment advice.