The Korea Composite Stock Price Index (KOSPI) surged by as much as 4.7%. This followed a two-day selloff that had pushed the index to its lowest point since April, after which global investors moved in to purchase shares in South Korea's chip sector, lifting the broader market.

The KOSPI initially fell by 1.3% in early trading before reversing course to trade higher across the board.

Samsung Electronics, SK Hynix, and SK Square were the core heavyweight stocks driving the market's advance.

The Korea Exchange triggered a sidecar circuit breaker mechanism, temporarily halting programmatic buy orders for the composite index.

Shawn Oh, head of Korean equities at NH Investment & Securities, noted that record-high export data for July 1-20 provided strong support for domestic chip stocks: semiconductor exports surged by 180.6% year-on-year to $22.11 billion, accounting for 40.3% of the country's total exports.

Strategists including Mixo Das at J.P. Morgan maintained an overweight rating on South Korean equities, setting a 12-month base target of 12,500 points for the KOSPI, citing optimism around the AI industry cycle and related fundamentals.

In a research note, they wrote: "Large cloud service providers will continue to increase their capital expenditures. While recent market commentary has raised questions about whether multiple technological and process breakthroughs could weaken demand for memory chips, there are no concrete signs of actual demand weakening yet."

Global foreign investors and domestic funds were net buyers of KOSPI constituent stocks overall, with trading activity concentrated in the technology sector; retail investors were net sellers during the same period.

The small and mid-cap Kosdaq index also turned from losses to gains, rising by as much as 0.8%.