TradingKey - During the Asian trading session on July 31, Japanese and South Korean stock markets staged a revenge rally, with SK Hynix surging over 27% and Samsung rising more than 22%.

The Korea Composite Stock Price Index (KOSPI) saw its gains expand to as much as 13% early in the session, prompting the Korea Exchange to activate the "sidecar" mechanism and suspend program trading for five minutes to mitigate extreme market volatility. Meanwhile, the KOSPI had fallen by a cumulative 17% over the previous three trading days.

Source: TradingView

At the same time, the Japanese stock market was also boosted, with the Nikkei 225 Index rising 4.10% to temporarily trade at 64,406.49 points, clawing back some of the losses from its previous consecutive corrections.

In terms of individual stocks, the South Korean semiconductor sector exploded across the board. SK Hynix surged over 27% intraday, while Samsung Electronics rose nearly 22%, serving as the main drivers of the KOSPI's sharp rebound.

SK Group Chairman Chey Tae-won purchased 3,620 shares of SK Group stock in his individual name for the first time on July 30, which was viewed by the market as a positive signal of confidence from management.

Furthermore, after the South Korean stock market suffered a cumulative drawdown of about 40% over the past month, the South Korean government has continued to study market stabilization measures. The Korea Exchange recently conducted a technical feasibility assessment of emergency plans, such as temporarily banning short selling and narrowing price limits. Although regulators emphasized this does not mean immediate implementation, the discussions show that officials are actively preparing to cope with extreme market volatility.

JPMorgan stated that the high leverage risks previously accumulated in the South Korean market have been significantly released. The asset size of leveraged ETFs targeting the South Korean market has dropped from approximately $50 billion at the end of June to $17 billion, with most of the leveraged funds having completed deleveraging. Meanwhile, the ratio of VKOSPI to VIX volatility has begun to fall, indicating that market panic is gradually cooling down, which provides some support for a short-term rebound.

Meanwhile, the latest earnings reports and capital expenditure plans released by Microsoft and Meta in the overnight U.S. stock market eased market concerns about a slowdown in AI infrastructure investment, reigniting investor confidence in the AI industry chain.

AI-related sectors in the U.S. stock market rallied collectively, with Micron Technology ( MU) surging 18.3%, and Intel ( INTC) rising 11.4%. SK Hynix ADR soared 17.5%, and TSMC ADR rose 7.6%, with the positive sentiment quickly spreading to the Asian markets.

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