Foreign Selloff Exceeds 5 Trillion Won, Intensifying Losses as Geopolitical Tensions Rock Markets
South Korea’s benchmark Kospi index experienced a sharp decline of over 7% on Tuesday, fueled by escalating geopolitical tensions in the Middle East following reported US-Israeli strikes on Iran. The market volatility triggered a temporary trading halt during the session.
The Kospi closed at its daily low of 5,791.91, a significant 7.24% drop from the previous trading day. This downturn occurred on the first trading day after reports of the joint US-Israel attack on Iran. While the index initially opened at 6,165.15 and remained above the 6,000 mark in early trading, selling pressure intensified throughout the afternoon, pushing it below the 5,800 level.
At 12:05 p.m. KST, the Korea Exchange implemented a sell-side sidecar – a five-minute suspension of program trading for Kospi 200 futures – following substantial declines in derivatives. This marked the first such activation since February 6th. At the time of the halt, Kospi 200 futures had fallen by 5.09% to 890.05.
Retail investors attempted to capitalize on the dip, net purchasing 5.79 trillion won ($4 billion) worth of shares. However, this buying activity was overshadowed by heavy foreign selling, totaling 5.14 trillion won. Institutional investors also contributed to the selloff, offloading 886.3 billion won worth of shares.
The losses were concentrated among large-cap stocks that had seen recent gains. Samsung Electronics closed at 195,100 won, a decrease of 9.88%, while SK hynix ended the day at 939,000 won, down 11.5%.
Hyundai Motor and Kia also experienced significant declines, shedding 11.72% and 11.29% respectively.
Conversely, defense and energy stocks saw a surge in value. LIG Nex1 and Hanwha Systems both reached their daily upper limits, while S-Oil gained 28.45%.
Shipping stocks rallied on expectations of increased freight rates amid concerns regarding potential blockades of the Strait of Hormuz. Korea Line Corp. and Heung-A Line both hit their daily ceiling prices.
The tech-heavy Kosdaq index also retreated, closing at 1,137.7, a decrease of 4.62%. The index initially opened 1.92% lower and briefly turned positive in early trading, but subsequently reversed course and declined further.
The Korean won weakened in tandem with the equities market. It was quoted at 1,466.1 per dollar at the close of daytime trading, weakening by 26.4 won from the previous session and reaching its weakest level in a month.
“The short-term correction triggered by Iran-related concerns presents an opportunity to ease valuation pressures,” stated Yoo Myoung-gan, a researcher at Mirae Asset Securities. He added, “Structural drivers, including improved corporate earnings, market-friendly policies, and liquidity inflow, remain intact.”
silverstar
