Q3 corporate earnings likely to sustain KOSPI rally

An electronic board shows the KOSPI closing at 3,610.60 points, up 1.73 percent from the previous session, on the trading floor of Hana Bank in Seoul, Friday. Yonhap

Korea’s benchmark KOSPI set an all-time high by breaking 3,600 points last week, propelled by surging demand amid the artificial intelligence (AI) boom.

Many say the months of rally will be sustained by stronger-than-expected third-quarter corporate earnings reports, particularly from tech giants like Samsung Electronics and SK hynix.

However, rising macroeconomic uncertainties and geopolitical risks pose headwinds. Chief among them is the escalating U.S.-China trade tensions, as indicated by U.S. President Donald Trump’s Oct. 10 plan to impose an additional 100 percent tariff on Chinese imports starting Nov. 1. The retaliatory measure against China’s rare earth export restrictions could raise the average tariff rate on Chinese goods entering the U.S. to 155 percent, reigniting global supply chain concerns.

The Korean currency weakening to 1,420 won against the U.S. dollar is another unfavorable market development for foreign investors, since won-denominated Korean securities converted to U.S. currency would lead to weaker returns.

According to financial market data, the KOSPI ended at 3,610.60 on Oct. 10 after reaching an intraday high of 3,617.86.

Propelling the rally were foreign investors who net bought more than 1 trillion won ($699.2 billion) that day.

Key drivers included Samsung Electronics and SK hynix, with respective gains of more than 6 percent and 8 percent.

Samsung Electronics’ market capitalization increased by 31 trillion won, while SK hynix gained about 23 trillion won. Together, these two large-cap stocks account for 29 percent of KOSPI’s total market capitalization.

The two semiconductor titans trended up, amplified by U.S. tech sector developments such as AMD’s major supply deal with OpenAI and the Trump administration’s approval of Nvidia chip exports to the United Arab Emirates.

Analysts say these factors signal robust global demand for semiconductors, which may reinforce Korea’s tech-heavy market.

“AI-related tailwinds and dovish signals from the U.S. Federal Reserve September meeting minutes created a strong bullish momentum, despite underlying risks such as the U.S. shutdown and AI valuation concerns,” said a Kiwoom Securities report.

Any further rally will be determined by the third-quarter earnings reports. Samsung Electronics is set to release its preliminary figures on Oct. 14, followed by a wave of reports from other major listed companies, including LG Electronics. SK hynix’s figures are expected late this month.

Market consensus has the earnings forecasts improving.

The combined operating profit estimate for 98 KOSPI-listed firms as reviewed by at least three brokerages came to over 45.89 trillion won as of late September, up 0.29 percent from the previous month.

Semiconductors have been the primary driver of the upward revisions.

“Memory chip prices have been rising, building expectations for earnings surprises. This is strengthening the case for improved investment sentiment for Korean equities, especially semiconductor shares,” an NH Investment & Securities report said.

Meanwhile, headwinds linger.

Trump’s tariff plan on Chinese goods triggered a sharp sell-off in U.S. equities, with the S&P 500 sliding 2.7 percent and Nasdaq plunging 3.5 percent.

Rising global protectionism, including the European Union's steel tariffs and weak Korean currency, may drag on Korea’s export-driven economy.

Still, analysts say semiconductor shares and a solid earnings outlook should be the focus.

“The KOSPI rebounded sharply with support from leading sectors, as evidenced by April’s tariff-driven drops registering a rapid recovery. Semiconductors are those leaders,” said a Hana Securities report.