Kospi closes on record high despite Iran war risk

South Korea's benchmark Kospi rose to a fresh high Tuesday, surpassing the previous record set just before the outbreak of the Iran war in February.

The index closed the session at a record high of 6,388.47 points, advancing 2.72 percent from the previous session. After kicking off the day above the 6,300 mark at 6,302.54, the index extended gains throughout the session and finished the day on a high.

Tuesday's rally pushed the index past previous highs on both an intraday and closing basis. The earlier intraday peak stood at 6,347.41 points on Feb. 27, while the prior closing high was 6,307.27 in the previous session.

Foreign investors drove the rally, net buying 1.33 trillion won ($904 million) in shares, while institutions added 737.9 billion won. Retail investors were net sellers, offloading 1.92 trillion won.

Large-cap stocks led the gains, with Samsung Electronics rising 2.1 percent to 219,000 won and SK hynix advancing 4.97 percent to 1.22 million won, climbing past the 1.2 million won mark for the first time.

Shares of SK hynix surged as the chipmaker expected to post a record operating profit exceeding 40 trillion won Thursday.

LG Energy Solution, which officially confirmed it is supplying lithium iron phosphate batteries for Mercedes-Benz, also jumped 11.42 percent, overtaking Hyundai Motor to become the third-largest stock on the Kospi by market capitalization, excluding preferred shares.

Hyundai Motor gained 3.61 percent to 546,000 won.

After a blistering rally, the Kospi entered a volatile phase with the outbreak of the Iran war, falling as low as 5,042.99 during trading on March 31, as risk-averse sentiment weighed on the market.

Since April, the index has staged a recovery, as risk appetite improved on hopes of easing geopolitical tensions.

Amid the rebound, foreign investment banks have turned increasingly bullish on the benchmark, lifting their targets for the index.

Goldman Sachs on Monday raised its 12-month Kospi target to 8,000 points from 7,000. It cited strong performance driven by upward earnings revisions on robust artificial intelligence-related semiconductor demand, but said Korean equities remain at a discount to global and regional peers.

Earlier on Friday, JPMorgan also raised its Kospi target to as high as 8,500, up from 7,500 in early February. The bank also raised its base-case target to 7,000 from 6,000.

"With key fundamentals of the Korean market remaining on track for now, this opens up space for the Kospi to build further on recent momentum," a JPMorgan report showed, citing memory cycle conditions, governance reforms and thematic growth.

While chip stocks such as SK hynix and Samsung Electronics have been leading the Kospi rally, the report noted that it would be inappropriate to apply rules from previous cycles to gains in memory stocks.

"Given the uniqueness of this cycle, applying preemptive rules-of-thumb from previous cycles should be done with care, and it may be preferable to be too late than too early in exiting positions here," the report read.

Amid heavy foreign buying, the Korean won strengthened against the dollar as well. It was quoted at 1,468.5 per dollar at the close of daytime trading, appreciating 8.7 won from the previous session.

Although it had briefly entered the 1,460 range in after-hours trading on Friday, this marks the first time in about a month since March 11 that the won’s daytime trading close has strengthened past 1,470 per dollar.