The Korean stock market’s seven-day consecutive upward trend came to an abrupt halt on Friday, as intensifying tensions in the Middle East spurred investors to adopt a risk-averse stance. This shift in sentiment also led to a significant decline in the exchange rate of the Korean won against the US dollar.
KOSPI Takes a Hit
On the day, the Korean Composite Stock Price Index (KOSPI) suffered a setback, dropping 25.41 points, or 0.87%, to close at 2894.62. Just a day prior, on Thursday, the KOSPI index had briefly breached the 2,900-point threshold, a milestone not achieved in over three years, following its seven-day rally.
Trading Activity and Capital Flows
Friday’s trading session saw a volume of 921 million shares changing hands, with a total transaction value amounting to 17.2 trillion won. The market breadth was clearly negative, with 763 stocks declining and only 149 stocks registering gains.
In terms of capital flows, institutional investors were net sellers, offloading 610.9 billion won worth of stocks. This selling pressure was offset by net purchases of 121.2 billion won by foreign investors and 466.9 billion won by retail investors.
Mixed Signals from the US Market
Overnight, the US stock market closed higher, buoyed by reduced inflationary pressure and stable interest rates. The Dow Jones Industrial Average climbed 0.24%, the Nasdaq Composite Index, dominated by technology stocks, also rose 0.24%, and the S&P 500 Index advanced by 0.38%. However, this positive momentum failed to carry over to the Korean market.
Catalysts for the Sell-Off
The primary factor dampening investor sentiment was Israel’s attack on Iran. Israeli officials reported that the country had conducted multiple rounds of airstrikes on Tehran’s nuclear facilities and military installations, creating geopolitical uncertainty.
Adding to the concerns, the US Trump administration’s plan to include imported household appliances such as dishwashers, washing machines, and refrigerators in the list of derivatives subject to a 50% steel tariff further eroded investors’ risk appetite. Scheduled to come into effect on June 23, this expanded steel tariff plan is expected to impact major South Korean companies like Samsung Electronics and LG Electronics.
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