South Korea's benchmark Kospi index climbed for a second consecutive trading session, closing 3.8% higher at 6,598.26 points. The rally was fueled by gains in semiconductor and technology stocks, which lifted the broader market.

The South Korean stock market advanced on Wednesday, buoyed by overnight gains on Wall Street. Strong earnings reports from major U.S. artificial intelligence (AI) related companies helped stabilize investor sentiment and provided a positive backdrop for regional markets.

Minutes from the Bank of Korea's July meeting revealed that policymakers see a need to further tighten monetary policy. However, they emphasized that the timing and pace of future rate increases will depend on upcoming economic data. The central bank's cautious stance was noted by market participants.

Morgan Stanley economist Kathleen Oh commented that as South Korea's economic fundamentals strengthen, the Bank of Korea's rate hike cycle could accelerate faster than previously anticipated. Oh now expects the central bank to raise its policy rate to 3.5% by the first quarter of 2027, earlier than her earlier forecast. The economist added that both technology and non-technology exports are likely to continue accelerating, while consumption is expected to recover rapidly, supported by improving household incomes and fiscal stimulus. She further noted that demand-driven price pressures could keep core inflation elevated.

In response to the improving outlook, Morgan Stanley upgraded its 2026 growth forecast for South Korea from 2.8% to 3.4%, and raised its 2027 projection from 2.3% to 2.7%.