Foreign exchange trader monitoring exchange rates in the dealing room of Korea Exchange Bank in Seoul
Jung Young Jae | AFP | Getty Images
South Korea’s Kospi fell sharply on Wednesday, continuing its steep decline from the previous trading session as the escalating Middle East war dampened investor sentiment and widened the decline across Asian markets.
The Korea Exchange temporarily suspended trading in the Kospi index on Wednesday. A circuit breaker was also triggered on the Kosdaq market, which fell 14% to close at 978.44.
The Kospi index fell 12.1% to close at 5,093.54, while majors SK Hynix and Samsung Electronics fell about 10% and nearly 12%, respectively.
The Korean market was in turmoil last year, soaring more than 75%, but the Kospi hit a new high on the back of major semiconductor companies whose stock prices soared due to strong demand for memory chips, and continued to rise into the new year.
Korean stocks from 1 year ago
“The decline in KOSPI could be mainly due to the concentration in a single stock seen in the Korean market,” said Lorraine Tan, director of equity research Asia at Morningstar.
Memory giants Samsung and SK Hynix account for nearly 50% of the index, according to Morningstar data.
“While we believe the stock price decline is partially driven by profit-taking after a strong rally in a risk-off environment, it also hints at growing concerns that the pace of AI data center adoption will slow as energy costs are significantly higher than regular data centers,” Tan said.
Furthermore, Daniel Yoo, global market strategist at Yuanta Securities, said the Korean stock market is particularly sensitive to fluctuations in oil prices, and geopolitical shocks in the Middle East tend to cause short-term volatility.
As a major oil importer, South Korea’s manufacturing-based economy is vulnerable to rising energy costs, and a spike in oil prices could put pressure on industrial and export-oriented sectors.
Yu said the recent drop in the Kospi should be seen as a correction after a strong rally rather than a fundamental change in market outlook, adding that stability is likely to return once oil prices subside.
South Korea’s net oil imports account for 2.7% of its gross domestic product, making it one of the countries most vulnerable to current account pressures, according to Nomura.
Japanese Nikkei Stock Average fell 3.61% to 54,245.54 and Topix fell 3.67 to 3,633.67.
Investors in the region will also be keeping an eye on China’s annual parliamentary meeting of policymakers, which begins later in the day.
The gathering, known as the “Second Session,” will consist of a consultative meeting that begins later in the day and the National People’s Congress, which is scheduled to open on Thursday. Chinese Premier Li Qiang is scheduled to announce a series of economic goals at the National People’s Congress, most of which were finalized at the December meeting.
Australia’s S&P/ASX 200 index fell 1.94% to 8,901.2. Hong Kong Hang Seng Index fell more than 2.28%, while the mainland’s CSI 300 fell 1.14% to 4,602.62.
An official survey on Wednesday revealed that Chinese factory activity slumped in February as manufacturers suspended production and cargo shipments to celebrate the long holiday.
The official manufacturing purchasing managers index fell to 49 in February, lower than economists’ expectations of 49.1, the Office for National Statistics said.
Oil prices rose further, with U.S. crude futures rising 2.8% to $83.86 per barrel, up 3.03% amid the escalating conflict as Iran seeks to close the Strait of Hormuz.
Crude oil prices since the beginning of the year
A senior commander in Iran’s Revolutionary Guards said on Monday that a vital artery had been shut down and warned that ships attempting to pass through the waterway would be targeted, according to Iranian media.
US President Donald Trump said on Tuesday afternoon that the US Navy would escort tankers through the Strait of Hormuz if necessary.
“No matter what, the United States will ensure the free flow of energy to the world,” he said in a post on Truth Social. “America’s economic and military power is the greatest on earth, and more action will follow.”
Prices of precious metals have increased. spot gold Spot rose 1.64% to $5,170 an ounce. silver It rose almost 3% to $84.49 an ounce.
Overnight, socks prices in the U.S. again swung wildly as concerns over the protracted conflict between the U.S. and Iran roiled the market.
The Dow Jones Industrial Average fell 403.51 points, or 0.83%, to end at 48,501.27. The S&P 500 Index fell 0.94% to close at 6,816.63, and the Nasdaq Composite Index fell 1.02% to close at 22,516.69. At the day’s lows, the S&P 500 was down 2.5% and the Nasdaq was down about 2.7%. The Dow Jones Industrial Average (30 stocks) fell more than 1,200 points (approximately 2.6%) to its bottom.
—CNBC’s Lim Hui Jie, Sean Conlon and Pia Singh contributed to this report.
