Asian markets diverged on Wednesday as South Korea's KOSPI surged past the 7,000 threshold, powered by renewed strength in semiconductor and AI-related shares, while Japan's Nikkei 225 staged a modest recovery from the prior session's decline. The moves came despite mounting concerns over oil prices approaching $100 a barrel and persistent inflation risks.
KOSPI retakes 7,000 on chip rally
The KOSPI climbed 1.67% to 7,070.94 by late morning, reclaiming the psychologically important level. Samsung Electronics advanced 1.48%, while SK Hynix jumped 4.85%, extending the chip-led rally that has been a key driver of Korean equities. The Philadelphia Semiconductor Index's 1.3% overnight gain, despite a weaker US session, provided additional tailwind.
Other notable movers included Hyundai Motor, up 0.52%, and Hanwha Aerospace, which added 2.24%. Hanwha Ocean gained 2.32% after being named preferred bidder for a Royal Thai Navy frigate project valued at approximately $500 million.
The KOSPI's ability to hold above 7,000 will depend on the durability of AI investment and earnings growth at major chipmakers, according to Park Yeon-joo, head of research at Mirae Asset Securities. She also noted that Korean equities appear undervalued relative to their earnings power, as reported by Seoul Economic Daily.
Nikkei rebounds but yen caps upside
Japan's Nikkei 225 added about 0.35% to 65,495.23 by the midday break, recovering from Tuesday's 1.7% slide. Technology shares led the rebound, with SoftBank Group, Lasertec, and Kokusai Electric among the early gainers. Cable makers surged after Corning announced a multibillion-dollar supply agreement with Verizon for high-density optical fibre and connectivity products from 2027 to 2032, lifting Fujikura, Furukawa Electric, and Sumitomo Electric.
However, the stronger yen remains a key constraint. The currency traded around 153.3 per dollar, near its strongest level since February. LPL Financial strategist Adam Turnquist noted that markets now imply roughly a 98% probability of a Bank of Japan rate increase this month, supported by firmer GDP, inflation, and wage data. A stronger yen can pressure exporters by reducing the value of overseas earnings.
Oil near $100 keeps rate risks alive
The chip rally is unfolding against a more challenging macro backdrop. Brent crude climbed toward $100 a barrel after further attacks on Saudi energy infrastructure and renewed fighting involving Iran and US forces, with WTI trading around $94.5. The escalation has intensified concerns about prolonged disruption to Persian Gulf supply.
Higher crude prices are particularly significant for import-dependent economies like Japan and South Korea, as they can lift domestic costs and complicate inflation outlooks. This adds to the risk that central banks may need to keep monetary policy tighter for longer, which could weigh on equity valuations.
Elsewhere, Taiwan's TAIEX rose 0.6% and China's CSI 300 added 0.2%, while Hong Kong's Hang Seng fell 0.6% and Australia's benchmark slipped about 0.3%. The divergent performance underscores the region's sensitivity to both tech sentiment and energy price dynamics.
For investors, the interplay between AI-driven earnings optimism and oil-induced inflation fears will likely remain a central theme. As recent KOSPI moves show, chip stocks can overpower macro headwinds, but the sustainability of such rallies depends on continued earnings delivery. Meanwhile, oil's impact on global markets is being closely watched, and Japan's outlook remains tied to yen and rate decisions.
This article is for informational purposes only and does not constitute financial advice.
