Kospi rebounds after 10% crash: Dip buying or just a dead cat bounce?

With gains of over 95% recorded so far in 2026, Kospi has been the best-performing stock index in the world this year. This kind of momentum, once built, is not that easy to break.

Perhaps that is the reason the sharp selloff seen in Kospi on Tuesday couldn’t sustain, and the South Korean benchmark rebounded just the next day, even as concerns on artificial intelligence (AI) lingered.

However, the recovery has raised a bigger question: Is this the return of momentum or merely a relief rally after an aggressive selloff?

The Kospi index gained over 3% on Wednesday, a day after plunging nearly 10% amid concerns over stretched AI valuations and weakness in semiconductor stocks.

While the bounce indicates that investors found value at lower levels, analysts believe it may be too early to call it a sustained recovery.

A rebound after a sharp fall does not always signal that the damage has been repaired. The index still needs stronger follow-through, fresh triggers and improved growth visibility before bullish momentum returns.

Notably, the rebound was led by the same AI and chipmaking names that were at the centre of Tuesday’s market rout.

Shares of South Korea’s most valuable company, Samsung Electronics Co. Ltd, jumped more than 8% on Wednesday on reports that the company was preparing a share buyback worth nearly 90 trillion won ($5.8 billion) to reward employees for their performance. The recovery came after the stock tumbled more than 12% in the previous session.

SK Hynix Inc. also recovered, gaining over 2% after falling sharply by more than 12% on Tuesday. Reports suggesting progress on its planned American Depository Receipts (ADR) listing helped improve sentiment, as such a move could attract more global capital.

The Kospi has been one of the strongest-performing global indices in 2026, largely driven by optimism around artificial intelligence and semiconductor demand. However, the same AI-driven rally has also made the index vulnerable to sudden corrections whenever concerns around valuations or future growth emerge.

Why did Kospi crash on Tuesday?

The selloff was triggered by a combination of factors. Sentiment weakened after SK Hynix indicated a shift in focus towards traditional memory products from high-bandwidth memory chips used by AI developers. This came at a time when global investors were already questioning whether AI-linked stocks had run too far, too quickly.

Adding to the pressure, index provider MSCI decided to keep South Korea classified as an “emerging market” in its latest review, disappointing investors who were expecting Seoul to move closer to developed-market status.

MSCI said limited convertibility of the Korean won in offshore currency markets remained a key hurdle for any upgrade.

For now, Wednesday’s move shows that dip buyers remain active. However, the bigger test for Kospi will be whether the index can sustain the rebound and find fresh catalysts to support the next leg of growth — or whether this bounce fades after the initial bargain hunting.