As the stock market, which surged on hopes of an end to the war, plunged again, a level of volatility akin to a "shock" continues, deepening investors' concerns.
Experts advise rebalancing portfolios rather than making aggressive purchases amid the sharp up-and-down market. That is because for the geopolitical risk triggered by the Iran war to be fully resolved, more than a simple end-of-war declaration is needed; normalization of traffic in the Strait of Hormuz, stabilization of energy prices, and whether corporations can defend earnings all have to be confirmed. The prevailing analysis is that it will be difficult for now to expect a one-sided bull market as in the past.
Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "This rebound is more of a 'relief rally' driven by expectations and position unwinding than a resolution of geopolitical risk," adding, "This phase is a time to check your portfolio rather than an opportunity to maximize revenue."
Market indicators also show that investor sentiment has not fully recovered. As of on the 1st, the KOSPI200 volatility index (VKOSPI) was 61.95, up 0.17 points from the previous trading day. A reading above 50 is generally interpreted as a "fear zone," and that level has persisted for more than 20 trading days recently.
In March, the turnover of domestically listed stocks was 40.55%, exceeding 40% for the first time in about three years since April 2023. In other words, four out of every 10 listed shares changed hands in a month. It is interpreted that investors are repeatedly engaging in short-term trading without conviction on direction.
Many experts stress that investment strategy for stocks should shift to a "defensive approach." In particular, in highly volatile phases, building a portfolio focused on risk management is more important than chasing rising prices.
Kim said, "It is necessary to review exposure to high-beta (stocks with higher volatility than the market) assets or assets with high reliance on foreign fund flows," adding, "Securing a certain level of cash allocation is also an important strategy."
In sector selection, an analysis is emerging that "relative strength" matters more than a simple distinction between cyclical and defensive stocks. Noh Dong-gil, a researcher at Shinhan Investment & Securities, explained, "You should pick stocks that fall less when the index declines and rise better during rebounds," adding, "Focus on sectors with notable earnings improvement."
The trend in international oil prices is also cited as a variable that can widen differences in sector returns. Even as the war enters a concluding phase, international oil prices are more likely to stay above a certain level rather than quickly return to prior levels.
Noh said, "As supply shocks and a geopolitical premium are already priced in, international oil prices are likely to show downside rigidity," adding, "Sectors such as autos, nonferrous metals, and utilities, whose share prices are highly responsive to oil price movements, can offer higher expected returns when prices rebound, making them worth watching in a volatile market."
Experts believe the domestic stock market is more likely to continue a "boxpi market," repeating ups and downs within a certain range rather than forming a clear uptrend for the time being.
Kim Yong-gu, a researcher at Yuanta Securities Korea, said, "If the Middle East war situation is not resolved in a short period, the market is likely to repeat directionless fluctuations," forecasting, "In April, the KOSPI will show a period-adjustment move within the 5,000–5,700-point range."