Volatility in the domestic stock market is very high due to the aftermath of the U.S.-Iran war. The KOSPI index, which had tumbled to the 5,000 level last week, fell 5% on the 9th, then rose for two straight sessions and managed to recover to the 5,600 level.
An unprecedented level of volatility in KOSPI history is ongoing. First, inflows have increased. As of the 10th, investor deposits stood at 125 trillion won. Margin financing balances are 32 trillion won, and securities lending balances, interpreted as a leading indicator of short selling, also amount to 143 trillion won.
Kwon Sun-ho of Daishin Securities said, "At this point, the KOSPI index shows the highest volatility compared with major global markets," and noted, "The nature of recently expanded market funds appears to be more short term than long term, and it is estimated that volatility is widening as this funding structure combines with herd behavior."
In particular, the domestic market is swayed by developments in the war between the United States and Iran. On the 9th, the KOSPI index closed down more than 5% due to projections that the U.S.-Iran war would be prolonged and because of an "oil shock" triggered by the blockade of the Strait of Hormuz, a global oil trade route.
The very next day, when U.S. President Donald Trump said "the Iran war will end soon," the KOSPI index surged more than 5% for two consecutive days.
Daishin Securities assessed that current KOSPI investor sentiment has entered a fear zone comparable to "Liberation Day" in April 2025, when the United States imposed universal tariff, and to the level of fear during the Yoon Suk-yeol administration's martial law incident in December 2024.
Brokerages advise looking at returns after the fear zone. If so, which stocks should investors watch?
Daishin Securities broadly divided the characteristics of stocks that recorded the highest returns over one month after past fear zones into two categories: top earnings revision names and overly sold-off names.
Kwon analyzed, "It is a pattern in which both the recovery of stocks with upward earnings revisions that fell on panic selling during the fear phase and the rebound of corporations that recorded excessive declines appear simultaneously."
Kwon then said that leading names in the securities, shipbuilding, and electric equipment sectors were included among the top earnings revision stocks. For overly sold-off names, the food and internet sectors were selected.
Kwon explained, "There is a possibility that geopolitical conflicts could have direct or indirect effects on domestic corporate results," but added, "If one can tolerate volatility, semiconductor names, where profit outlooks are currently holding firm, and essential consumer goods names, whose declines have widened, could provide relatively favorable returns."