The Kospi Index and the iShares MSCI South Korea ETF (EWY) rebounded as sentiment in the market improved following the Treasury Department’s intervention in the bond market. It jumped by over 6% on Thursday, reaching a high of 6,874 points, while EWY rose to $180. EWY’s inflows have surged in the past month.
South Korean stocks jump after US intervention
The Kospi Index jumped after the latest US intervention in the bond market. Scott Bessent intervened by expanding a buyback program through early November. This buyback will focus on longer-dated debt, a move meant to calm an alarmed bond market.
The announcement led to a sharp plunge in US bond yields. The US 30-year yield fell from 5.336% to 5.185% today. Similarly, other global bond yields dropped, with the South Korean ones falling to 4.69% from this week’s high of 4.7%.
Still, chances are that the intervention will have a minimal long-term impact because concerns about the US economy are still there. Investors are concerned about the rising energy prices, with gasoline remaining above $4 a gallon and the diesel crack spread soaring to a record high.
Crude oil prices have remained steady this week, with Brent, the global benchmark, rising to $91.5 and WTI moving to $84.60. This rally is continuing as the stalemate between the US and Iran continues. In a statement, Trump threatened Iran with an “Economic D-Day”, a move meant to put pressure on its leaders to reach a deal.
Also, there are concerns about the rising US government debt, which has jumped to a record high and is about to cross the $40 trillion milestone. This debt has more than doubled in the last decade.
The ongoing Kospi Index and EWY ETF rebound was driven by the largest names: Samsung Electronics and SK Hynix. Samsung Electronics stock jumped by 7%, while SK Hynix soared by 10.6%. Other top South Korean companies like SK Square, LG Energy Solution, and Samsung C&T also jumped.
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Meanwhile, the EWY ETF, which tracks companies in the Kospi, has had substantial inflows in the past few days. ETF Db data shows that the fund has had over $6.2 billion in inflows in the last month, bringing its total assets to $29 billion. This fund is one of the simplest ways for Americans to participate in the South Korean economy surge.
Kospi Index technical analysis
KOSPI Index chart | Source: TradingView
The daily chart shows that the Kospi Composite Index has rebounded from this month’s low of 5,279 points to the current 6,864 points. It has moved above the strong, pivot, reversal level of the Murrey Math Lines tool.
The index has also remained above the upper side of the descending channel and the 100-day Exponential Moving Average (EMA). It also formed an abandoned baby candlestick pattern, a common bullish reversal pattern.
Therefore, the most likely scenario is where the index jumps to the Major S&R pivot point of 7,500 in the near term. A move above that level will point to more gains, potentially to the strong, pivot reverse level of 8,750.
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