KOSPI's Record 17.91% Rebound: Foreign Buying and Market Outlook
Following a 22% plunge in July, the KOSPI staged a historic 17.91% rebound driven by massive foreign buying and short covering. We analyze the market drivers and the outlook for August.
Record Rebound Amidst Extreme Volatility
As of August 2, 2026, the South Korean stock market is experiencing extreme volatility. According to Seoul Economic Daily, the KOSPI plunged approximately 22% in July during a so-called 'panic market'. However, on July 31, the index recorded a historic 17.91% surge. This dramatic rebound was largely driven by the growing consensus that the recent sell-off was excessive compared to corporate fundamentals, pushing the market into 'historically undervalued' territory.
Key Drivers Behind the Surge
The unprecedented KOSPI rebound can be attributed to three main factors:
- Strong US Big Tech Earnings: Better-than-expected earnings from major US tech companies swiftly restored global investor sentiment, particularly in the AI and semiconductor sectors.
- Massive Foreign Inflows: According to Korea Economic TV, foreign investors led the rally by net buying over 7 trillion won in the domestic market on July 31 alone.
- Large-scale Short Covering: Forced selling by highly leveraged hedge funds facing margin calls finally subsided. This triggered massive short covering—buying back shares to close short positions—which further amplified the index's gains.
August KOSPI Outlook and Strategy
While analysts leave room for further upside in August, they advise a cautious approach. On the positive side, Korea Economic Daily reported that corporate earnings remain robust, with 4 out of 10 listed companies delivering earnings surprises in the second quarter.
However, opinions are divided on whether this surge signals a structural trend reversal or merely a technical bounce from oversold conditions. News1 and other media outlets emphasize that investors should closely monitor the following:
- Continuity of Foreign Buying: Whether the massive inflows will be sustained rather than being a one-off event.
- External Uncertainties: Trends in US Treasury yields, forex market volatility, and geopolitical risks.
In conclusion, although the KOSPI has moved past its worst phase and found a foothold for recovery, external volatilities have not entirely dissipated. A strategy focused on monitoring core corporate earnings while managing risks is highly recommended.