On the 23rd, the KOSPI index plunged more than 6% on fears the Middle East war would escalate. It was the biggest drop since the 4th, when the KOSPI index recorded its largest-ever decline (12.06%) right after the Iran war broke out.
Experts said Korea's stock market fundamentals are not damaged and advised against overreacting to war fears. However, they said if the Iran war drags on, the KOSPI index could fall to the 5,000-point level.
On the 23rd, when the KOSPI index crashed 6.5%, share prices of 864 out of 927 stocks listed on the Korea Exchange fell. That is 93% of all listed stocks. The KOSDAQ index also tumbled more than 5%, giving up the 1,100 mark again. Of the 1,756 stocks listed on the KOSDAQ market, prices of 1,527 fell.
International crude prices surged and the won also plunged as the war between the United States and Iran showed signs of dragging on. The won-dollar exchange rate closed at 1,517.3 won on a weekly trading basis, the highest level in 17 years since the close of 1,549.0 won on March 9, 2009, when the global financial crisis was in full swing.
The domestic financial market swung sharply because the Iran war appeared to be escalating. The United States hinted at plans to deploy ground troops to Iran. When U.S. President Donald Trump said on the 21st (local time) that unless Iran opens the Strait of Hormuz within 48 hours he would devastate power plants, Iran responded that it would retaliate.
For now, positive views dominate. The securities industry advised using this correction as a buying opportunity. Kim Doo-eon, a Hana Securities analyst, said, "The Trump administration's 48-hour ultimatum suggests the Iran-Israel conflict is shifting into a protracted war of attrition," but added, "In Middle East disputes, right after initial fear peaks, a pattern of seeking an exit through unofficial diplomatic channels repeats, so the current situation is unlikely to see prolonged 'panic selling.'"
Cho Ah-in, a Samsung Securities analyst, also said, "Uncertainty around the Middle East situation is high, but we still see negotiation potential rather than a prolonged war as the base scenario," adding, "Looking at the past three weeks since the Iran war broke out, selling into an excessively falling market offered little real benefit."
Lee Eun-taek, a KB Securities analyst, said, "After sharp drops in financial assets, 'W-shaped rebounds' have been more common than 'V-shaped rebounds,'" adding, "The Korean stock market is in the process of confirming a second bottom, and we maintain a buying strategy below 5,300 points."
However, some analysts said that if the unstable market with international oil above $100 continues, the lower bound of the KOSPI index should be left open to the level seen on the 4th.
Kim Jun-young, an iM Securities analyst, said, "With prices of gold and silver—assets considered safe havens—also falling, they are failing to play their role, which shows that demand for liquidity is rising in a market that was excessively leveraged," adding, "Since the KOSPI index fell to the 5,000 level on the 4th, the index may form an upper and lower range around recent levels."
Analyst Lee Eun-taek said, "In a bull market, corrections appear more than twice as often as in an average year (two to three times annually), and the declines are much larger," adding, "Even if this correction recovers, it means there is a chance of another plunge in the second half of this year."