Even the KOSPI index, which had been soaring endlessly this year, could not avoid global geopolitical risks. Amid fallout from tensions between the United States and Iran over the weekend, the KOSPI index fell more than 7%, marking a "Black Tuesday." Just four trading days after hitting 6,000 for the first time ever, the KOSPI plunged more than 400 points in a single day and sank to the 5,700 level.
On the 3rd, the KOSPI index closed at 5,791.91, down 7.24% (452.22 points) from the previous trading day. The KOSDAQ index also finished at 1,137.70, down 4.62% (55.08 points) from the previous trading day.
That day, the KOSPI opened at 6,165.15, down 1.26% from the previous trading day, starting on shaky ground. It struggled early to defend the 6,100 level, but the support collapsed under indiscriminate dumping by foreigners. As the decline widened to more than 5% in the afternoon, a sell-sidecar (temporary suspension of program-trading quote effectiveness) was triggered for the first time in a month.
The order flow window was a battlefield. Foreign investors alone dumped 5.1 trillion won worth onto the market in a single day, devastating the index. Institutions also posted a net sell of 892.1 billion won, adding to the downward pressure. Individual investors, known as "Donghak ants," mounted a body-on defense with a record net buy of more than 5.8 trillion won, but it was not enough to stop the exodus of foreign funds.
Noh Dong-gil, a researcher at Shinhan Investment & Securities, said, "As Middle East risks materialized over the weekend, volatility expanded," and "a fierce tug-of-war over order flows unfolded between foreigners and individual investors."
Lee Kyung-min, a researcher at Daishin Securities, analyzed, "Institutions that moved to bargain hunting early in the session also shifted to net selling, and as foreign selling intensified, the KOSPI index's decline widened."
The blue chips that have led the KOSPI index also plunged. The "200,000 Electron" and "1 million Nix" levels collapsed that day. Samsung Electronics and SK hynix tumbled 9% and 11%, respectively. Hyundai Motor and Kia also fell more than 11%.
The researcher explained, "Foreign profit-taking was concentrated in large caps such as semiconductors, autos, and financials, which led this year's KOSPI gains."
By contrast, defense, shipping, and refining stocks, which emerged as beneficiaries of Middle East geopolitical risks, were strong. LIG Nex1 hit the upper limit, and Hanwha Aerospace, Hanwha Systems, and Hyundai Rotem were also strong. Shipping and refining stocks such as Korea Line Corporation, S-Oil, and Pan Ocean also closed higher.
The KOSPI index fell more steeply than major Asian markets. China's Shanghai Composite Index is currently down 1.46% (60.88 points) from the previous trading day at 4,121.71, and Japan's Nikkei 225 closed at 56,279.05, down 3.06% (1,778.19 points) from the previous trading day. Hong Kong's Hang Seng Index is also trading down 1.07% (278.47 points) at 25,781.38.
The "Middle East risk" that had built up during the market holiday exploded at the open. While the domestic market was closed the previous day for the March 1 Independence Movement Day substitute holiday, a major shock hit in the form of a U.S.-Israel strike on Iran. With the Korean stock market unable to digest the global shock in real time and taking a day off, it is analyzed that at the open it dumped two days' worth of bad news at once and was hit by a sudden "supply bomb."
Researcher Noh analyzed, "Stock markets in Asian countries other than Korea appear relatively calm after experiencing a bout of volatility the previous day," adding, "In China's case, although its crude oil imports from the Middle East are large, expectations for policy ahead of the Two Sessions are persisting, resulting in relatively less volatility."
In the securities industry, it is analyzed that the future direction of the stock market depends on the volatility of oil prices and interest rates, the duration of the crisis, and whether the Strait of Hormuz is blocked. In particular, risks are expanding as Iran's Islamic Revolutionary Guard Corps has warned of attacks on ships passing through the Strait of Hormuz.
The researcher analyzed, "The two variables that determine the stock market's impact are the duration of the crisis and whether the Strait of Hormuz is blocked," adding, "Iran's retaliatory missile and drone attacks are continuing, and the U.S. State Department has issued evacuation warnings to citizens in Middle East conflict zones, heightening tensions."