Kospi’s ‘Roller-Coaster’ Swings Face Test as US Hyperscaler Earnings Loom

NH Investment & Securities sees the Kospi in a 6,700-7,600 range this week

South Korean brokerages expect the Kospi to keep swinging around the 7,000 level in the week of July 27-31. The benchmark was so volatile last week that investors dubbed it the “Roller-Kospi,” a play on roller coaster and the Kospi index. On July 24, the final trading day of the week, the index closed at 6,690.62, down 406.27 points, or 5.72%, from the previous session.

NH Investment & Securities said on July 26 that the Kospi would likely trade between 6,700 and 7,600 this week. It cited easing concerns over artificial-intelligence capital spending and upward revisions to earnings forecasts as positive factors, while pointing to the risk of a broader military clash between the US and Iran as a negative.

“Alphabet’s second-quarter earnings helped ease the market’s recent concerns over AI capex,” NH Investment & Securities analyst Lee Sang-jun said. The company raised its full-year capex outlook to $195 billion-$205 billion from $180 billion-$190 billion and signaled another substantial increase next year.

Alphabet’s cloud remaining performance obligations also rose to $514 billion from $460 billion, Lee said. The company also announced plans to use third-party computing infrastructure. He added that results from other hyperscalers, or operators of massive data centers, would likely highlight shortages in AI capacity in much the same way as Alphabet’s earnings did.

Investors are now focused on hyperscaler earnings due this week. Meta Platforms and Microsoft are scheduled to report on July 30, Korea time, while Amazon.com is due to release results on July 31.

Final earnings results are also due from South Korea’s two biggest chipmakers, Samsung Electronics and SK Hynix. SK Hynix is set to report on July 29 and Samsung Electronics on July 30.

“At Samsung Electronics and SK Hynix, investors need to check long-term supply contracts as well as memory demand and profitability,” Daishin Securities analyst Lee Kyung-min said. For big tech earnings, the key question is whether increased AI capex is translating into actual revenue growth and improved profitability.

He added that investors need not be disappointed even if some companies miss expectations. Alphabet’s earnings already demonstrated resilient AI demand, and that could serve as a guide for other companies going forward.

Investors are also watching the outcome of the US Federal Open Market Committee meeting on July 30. The market currently expects the Fed to leave its benchmark interest rate unchanged. That view follows a June US nonfarm payrolls report that came in well below both market expectations and the previous month’s reading, along with a June consumer price index report showing both headline and core inflation easing.

“As for the future policy path, Fed Chair Kevin Warsh is unlikely to offer many clues given his usual stance,” Lee Sang-jun said. He added that Warsh also stayed silent on rate decisions during recent congressional testimony, limiting the market impact.

“With comments at the press conference constrained by Chair Warsh’s task force, stability in bond yields and the exchange rate would gain support if there is no additional tightening signal,” Lee Kyung-min said. In that case, he said, the Kospi’s rebound attempt, supported by foreign net buying, would likely continue.

Lee Su, Hankyung.com reporter, 2su@hankyung.com