Asian markets rally as Kospi surges

MSCI’s broadest index of Asia-Pacific shares outside Japan added 4.6%

Asian markets rallied strongly on Friday as South Korea’s battered market made a record comeback, stirring hopes that the recent selloff in AI-linked assets may be near an end.

The yen was also firmly in the spotlight, holding some distance away from a 40-year low after suspected intervention from authorities, which came ahead of the Bank of Japan’s (BOJ) rate decision later in the day.

Kospi surged more than 10% on Friday, reversing sharp losses from earlier in the week. Nikkei similarly gained 4.5% and MSCI’s broadest index of Asia-Pacific shares outside Japan added 4.6%.

Both the earnings as well as the sentiment are kind of coming back a bit after the really overexaggerated move in the earlier part of the week, said Fabien Yip, a market analyst at IG.

The AI demand story didn’t really decelerate, it seems like it’s still sustainable. So the selloff that we saw is maybe the market overreacting to some of those concerns around (capex spending), Yip said.

Despite Friday’s turnaround, the Kospi was still set to lose over 25% in July, marking its largest monthly loss since 1997.

The wild swings in the market had prompted South Korean authorities to rein in the leveraged products that have wreaked havoc and wiped out the savings of some retail investors.

The market sentiment is fragile around the AI debate, said Ji Young Park, senior EM equity portfolio manager at Amundi.

The market performance has been narrow in Asia ex-Japan, mostly related to AI given the sharp correction we’ve had across the markets that have AI exposure, we believe we are close to the end of this prolonged volatility, Park said.

Chinese markets followed suit. China’s CSI AI index added more than 7%. The Hang Seng Tech index rose 0.5%.

Oil prices declined on Friday, with Brent crude futures down 1.2% at $88.00 per barrel.