South Korean Shares Rebound 4.1% After Chip Stocks Lead Recovery

South Korea's KOSPI shot up 4.1% in the first 30 minutes of Wednesday's session, recovering a chunk of the previous day's near-10% plunge. The index added more than 330 points to 8,550.21 as trading opened.

Chip stocks led the rebound. SK Hynix gained 5%. Samsung Electronics jumped more than 9%. The move came as retail investors piled into leveraged exchange-traded funds, said Seo Sang-young, a strategist at Mirae Asset Securities Co.

"Retail investors going into leveraged ETFs is what is driving this volatility, as many were waiting for chances to go into the market out of FOMO (Fear of missing out)," Seo said. The dip-buying instantly erased a large portion of Tuesday's double-digit losses, he noted.

Seo warned that more volatility lies ahead. "Micron is due to report earnings soon while the U.S. is waiting for inflation and jobs data," he said. Both events could swing the KOSPI again, given the index's heavy weighting in semiconductor names.

Other large-cap stocks also recovered. Hyundai Motor rose 1.66%, and Kia Corp added 1.97%. Steelmaker POSCO Holdings gained 0.93%, and drugmaker Samsung BioLogics rose 2.04%.

The KOSPI has risen 102.96% so far this year. The won has weakened 6.2% against the dollar over the same period. In the bond market, September futures on 3-year treasury bonds slipped 0.04 point to 102.99. The most liquid 3-year Korean treasury bond yield rose 1.1 basis points to 3.783%, while the benchmark 10-year yield added 0.6 basis points to 4.184%.

Foreign investors were net sellers of shares worth 626.3 billion won on the day.

The next catalyst for the KOSPI is Micron's earnings, due later this week, followed by U.S. inflation and jobs data that will shape expectations for the Federal Reserve's rate path.