The domestic stock market shook off the "Warsh shock" in just one day and rebounded. KOSPI, which had been briefly rattled by external variables, jumped more than 6% to close at a record high, while KOSDAQ also finished up more than 4%. Analysts said the swift rebound shows that yesterday's plunge stemmed more from psychological weakness tied to macroeconomic uncertainty than from any damage to market fundamentals.
On the 3rd, the KOSPI closed at 5,288.08, up 338.41 points (6.84%) from the previous day, setting a record high on a closing basis. It fully erased the prior day's drop of 274.69 points. Following the sell-sidecar (temporary halt of program-trading quotes) triggered the previous day, a buy-sidecar was activated from early trading, producing extreme volatility.
Although global risk assets tumbled across the board the previous day after U.S. President Donald Trump nominated the "hawkish" Kevin Warsh as the next Federal Reserve (Fed) chair, the market digested the shock in a day, suggesting the "Warsh shock" is turning into a short-lived episode.
Lee Kyung-min, a researcher at Daishin Securities, said, "With no fundamental changes beyond flow-of-funds effects, bargain hunting quickly flowed in and recouped the previous day's losses."
Lee Jae-won, a researcher at Shinhan Investment & Securities, analyzed, "Both the nomination of Warsh, which caused market volatility the previous day, and the sharp drop in commodity prices served as short-term reasons for profit-taking."
Foreigners and institutions, who had engaged in heavy selling the previous day, turned net buyers on the KOSPI market. While individuals were net sellers of more than 2.9 trillion won, foreigners bought a net 718.3 billion won and institutions bought a net 2.1694 trillion won. Among institutions, only securities companies in the financial investment category bought more than 1.45 trillion won. Individual exchange-traded fund (ETF) positions are counted under financial investment flows.
Regarding the sharp rebound in the KOSPI, researcher Lee Jae-won analyzed, "Samsung Electronics, SK hynix, and the KOSPI are all below a relative strength index (RSI) of 70, exiting overbought territory." This indicates technical overheating has eased.
An upgraded outlook for the KOSPI by global investment bank JPMorgan also supported the rebound. In a report released that day, JPMorgan raised its base-case target for the KOSPI to 6,000 and its bull-case target to 7,500.
Sectors that had fallen sharply the previous day showed clear rebounds during the session. Large-cap semiconductor stocks Samsung Electronics and SK hynix also surged. Samsung Electronics climbed more than 11%, and SK hynix rose 9% at the close.
Nuclear power and electrical equipment names such as LS Electric and Hyosung Heavy Industries recovered the prior day's losses as bargain hunters stepped in, and securities stocks, which are expected to benefit from the market rebound with strong earnings, also gained.
Meanwhile, at the same time, the KOSDAQ closed at 1,144.33, up 45.97 points (4.19%) from the previous day. KOSDAQ also rebounded as investor sentiment recovered on stabilizing commodity prices and strong U.S. manufacturing data.
The KOSDAQ market again appeared to be led by individual ETF buying that day. While individuals and foreigners were net sellers of 719.7 billion won and 85.7 billion won, respectively, institutions were net buyers of 856.9 billion won. About 800 billion won of the institutional inflows came from financial investment.