KOSPI rebounds after sharp fall; U.S. tech earnings to be tested

South Korean stock markets are closely monitoring upcoming earnings reports from U.S. tech giants, particularly Alphabet and Intel, as a key indicator for the nation's semiconductor sector and the broader KOSPI index.

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Mechanical selling in a sharp downturn is highly likely to miss the subsequent rebound.

The KOSPI recently saw a significant drop of over 25% in less than a month, driven by concerns over the semiconductor industry's peak and U.S. inflation data. However, the index has shown resilience, rebounding sharply in the week following the downturn. Analysts view this recent volatility not as a systemic risk but as a phase of increased fluctuation.

Shinhan Investment Corp. research suggests that sharp market drops of over 8% have historically been followed by a rebound within a week in 67% of cases since 2000, with an average return of 3.6%. This historical pattern supports the view that mechanical selling during a downturn can lead to missed recovery opportunities.

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Confirmation of Big Tech's capital expenditure guidance for expanding AI investment is crucial.

The focus now shifts to the earnings calls of Alphabet on July 22 and Intel on July 24, followed by Microsoft and Meta later in the month. Investors are particularly keen on assessing the capital expenditure guidance from these major tech companies, which will signal the future trajectory of AI investments and the semiconductor cycle. A positive outlook from these tech leaders could reignite market sentiment and boost South Korean semiconductor stocks like Samsung Electronics and SK Hynix.

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It is too early to interpret the decrease in customer deposits as an exit by individual investors.