A 5% jump does not, by itself, constitute a trend.

The sharp rise in the KOSPI, which exceeded 5%, was driven primarily by Samsung and SK Hynix. From the perspective of an individual investor, I do not view this move as the beginning of a trend.

Data flows originating from the U.S. and various geopolitical developments remain unclear. In the current climate, it is wiser to maintain a cautious approach and wait for the markets to settle. On days like these, the costliest mistake one can make is to increase one’s position out of fear of missing out on a single day’s rally. While this surge offers a glimmer of hope, hope and a trend are not the same thing.

The real question is: Is this a technical rebound or the start of a new trend?

This 5% jump should be interpreted as "bottom-fishing"—buying activity following a sell-off wave that has persisted for weeks. The dilemma is underscored by the fact that one financial institution, while warning of a potential profit shortfall in the memory chip sector by 2028 and revising target prices downward, has simultaneously maintained an "overweight" (increase exposure) recommendation on these stocks. In other words, they are suggesting that while risks exist, prices have fallen too far.

The 12-month forward price-to-earnings (P/E) ratios for Samsung and SK Hynix currently stand at 3.1 and 2.6, respectively. Both stocks are trading at their lowest valuation ranges since 2013, which suggests that the decline may have been somewhat excessive. However, low valuation alone does not guarantee a sustained rally; confirmation from the macroeconomic front is required for that. A "cheap" stock can continue to fall, just as an "expensive" stock can continue to rise—the market has demonstrated this time and again. US data that could calm the markets

The upcoming US CPI and PPI data for October will be decisive for the direction of the markets. Expectations point to a decline in headline inflation to 0.3% on a monthly basis. However, should the data come in higher than expected, it could strengthen projections for a Federal Reserve interest rate hike at the December meeting—a development that would likely dampen risk appetite.

Consequently, the current rally in the Korean market is seen as resting on a somewhat precarious foundation; it could only gain a firmer footing if US inflation data cools down and Fed officials signal a softer stance. Seoul cannot dictate its own path; while the story may be unfolding in Seoul, it awaits approval from Washington. If the data comes in "cool," the market gets more breathing room; if it comes in "hot," the recent 5% surge could quickly be erased.

Geopolitical tensions remain a factor

Then there is the geopolitical dimension. While a decline in oil prices and signs of potential negotiations fueled Monday’s rally, the strait remains effectively closed, and reports regarding tankers continue to emerge. In short, the tension has not dissipated—the flow of news has simply become less intense.

In such an environment, markets tend to price in good news rapidly, only to reverse those gains just as quickly when faced with bad news. Therefore, the rally in Seoul should not be interpreted as confirmation that geopolitical tensions have subsided. Rather, it is better viewed as the market temporarily setting aside a "worst-case" scenario—a scenario that could easily return to the forefront.

What does "wait and see" mean in this context?

At this stage, rather than panicking and expanding one’s positions, it is more logical to maintain existing holdings and observe as the market finds its direction. For the KOSPI, the 4,500–4,800 range can be monitored as the initial support zone in the event of a pullback. As long as the index remains above this band, the underlying structure stays intact; falling below it would suggest that the rally was merely a temporary rebound.

The narrative surrounding artificial intelligence and semiconductors remains valid in the long term. However, given the potential for short-term volatility, adopting a "wait for the data before taking a position" approach will help protect individual investors. This is not about sitting idle, but rather avoiding haste—adjusting one’s position based on the data, rather than acting in anticipation of it.

Patience is the strategy for this week.

In short, while this rally offers a glimmer of hope, confirming a sustainable trend will require incoming data from the U.S. and a cooling of geopolitical tensions. Remaining patient and allowing the market to define its own direction is the most prudent approach in this environment of uncertainty.

Practically speaking, I cannot make a decision based on a single day’s 5% move. I look at two key factors: post-data price closes and trading volume. If prices hold their gains following the data release and are supported by volume, then we can begin to discuss a potential trend. If, however, those gains are surrendered and volume declines, the move is likely just a temporary rebound. This week, the winner will not be the one who moves the fastest, but the one who thinks the most clearly.

This content is for informational purposes only and does not constitute investment advice.

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