South Korea's benchmark Kospi Index staged a sharp rebound on Thursday, climbing more than 6% to reach 6,874 points, as investor sentiment improved following the US Treasury Department's intervention in the bond market. The iShares MSCI South Korea ETF (EWY) also advanced, trading near $180, with inflows surging over the past month.
US bond market intervention sparks rally
The rally was triggered by Treasury Secretary Scott Bessent's announcement of an expanded buyback program, set to run through early November and focusing on longer-dated debt. The move aimed to calm an alarmed bond market, and it succeeded in driving yields sharply lower. The US 30-year yield fell from 5.336% to 5.185% on the day, while South Korean bond yields also declined to 4.69% from a weekly high of 4.7%.
However, analysts caution that the intervention may have limited long-term impact, as underlying concerns about the US economy persist. Rising energy prices remain a key worry, with gasoline prices above $4 a gallon and diesel crack spreads hitting record highs. Brent crude traded at $91.5 per barrel, while WTI rose to $84.60, as the US-Iran standoff continues. President Trump's threat of an "Economic D-Day" against Iran has added to supply concerns.
Additionally, the US government debt burden has escalated to record levels, approaching the $40 trillion milestone—more than double what it was a decade ago. These factors could weigh on global markets in the coming weeks.
Samsung and SK Hynix lead the charge
The Kospi's rebound was spearheaded by its largest constituents. Samsung Electronics jumped 7%, while SK Hynix soared 10.6%. Other major South Korean firms, including SK Square, LG Energy Solution, and Samsung C&T, also posted solid gains. The strength in tech and semiconductor names reflects renewed risk appetite among investors.
The EWY ETF, which tracks Kospi-listed companies, has seen substantial capital inflows. According to ETF Db data, the fund attracted over $6.2 billion in the last 30 days, bringing its total assets to $29 billion. For US investors, EWY remains one of the simplest ways to gain exposure to South Korea's equity market.
Technical outlook points to further upside
From a technical perspective, the Kospi Composite Index has rebounded sharply from this month's low of 5,279 points. It has moved above the strong pivot reversal level on the Murrey Math Lines tool and remains above the upper boundary of a descending channel. The index also holds above its 100-day exponential moving average (EMA). A bullish "abandoned baby" candlestick pattern has formed, signaling a potential trend reversal.
If the momentum continues, the index could target the Major S&R pivot point of 7,500 in the near term. A breakout above that level would open the door to further gains, potentially reaching the strong pivot reverse level of 8,750.
Investors should monitor whether the bond market intervention provides lasting support or if economic headwinds reassert themselves. The interplay between US fiscal policy, energy prices, and global growth will likely dictate the Kospi's trajectory in the weeks ahead.
This article is for informational purposes only and does not constitute financial advice.
