An extreme volatility market in which the KOSPI index falls and then rises by hundreds of points in a single day continues. On the 1st, the day after the KOSPI index plunged more than 4% on the 31st, it surged more than 8%. The war in Iran, which has a major impact on the global economy, is showing confusion between "escalation" and "end of war," and analysts say Korea's stock market is reacting particularly sensitively. In Yeouido's brokerage circles, some say the environment makes any near-term market outlook useless.
According to the Korea Exchange (KRX) on the 2nd, during last month (Mar. 2–31), there were only four out of 21 trading days when the KOSPI index's daily change stayed within ±1%. Until last year, a move of more than 1% was seen as a major swing, but these days such a move is instead viewed as relatively stable.
The direct cause of the sharp widening in the index's swings is the outbreak of the Iran war. International oil prices jumped right after the war, which is expected to stoke inflation and have a massive impact on the global economy. Early on, there were high hopes for an early end to the war, but as time passed, the possibility of escalation also emerged.
On top of that, President Trump's so-called "TACO" (Trump Always Chickens Out) moves also heightened investor anxiety. As a result, Korea's stock market, categorized as a risk asset, took the first hit.
Moreover, since the launch of the new administration last year, Korea's stock market had maintained a steady "upward-right" trend. With virtually no corrections to speak of, the unexpected risk factor of the Iran war had an even bigger impact.
Because this war is unfolding in the Middle East, the global economy is highly likely to suffer aftereffects for a considerable period even after it ends. With oil prices soaring due to the war, concerns about U.S. inflation are resurfacing.
Kang Dae-seung, an analyst at SK Securities, said, "Expectations for a U.S. economic rebound, a key driver of the stock market's rise at the start of the year, have changed since the war," adding, "Prolonged high oil prices and high interest rates will delay the recovery."
There are also suggestions that the volatile market could continue for a while. Chung Hee-chan, an analyst at Samsung Futures, said, "Historically, after an extreme buying spree, the market sometimes turns weak due to a depletion of supply-demand. Despite the index's strong gains, the fact that international oil prices remain at a high level of $100 per Barrel is a risk factor."
Fortunately, heading into first-quarter earnings season, earnings forecasts for the domestic market were revised up last month, which is positive. Ha In-hwan, an analyst at KB Securities, said, "Even amid the worst macro environment in March, first-quarter and full-year operating profit forecasts were revised higher," adding, "With the KOSPI price-earnings ratio (P/E) at a historical low, expectations for April earnings announcements will translate into market gains."
Experts advise that, in the current situation, a split-buying strategy focused on domestic leading stocks is advantageous. Analyst Kang Dae-seung said, "Strategically, it is effective to buy in tranches during corrections, centered on information technology (IT)," adding, "Regardless of the cycle, capital expenditure (CAPEX) related to artificial intelligence (AI) infrastructure is being executed."