Korean stocks suffer worst selloff since 2024 on Iran war risks

Representative image (Courtesy: Bloomberg)

South Korean stocks slumped as Middle East tensions stoked concern over the impact of rising energy costs, with global funds offloading more than $3 billion of local equities amid a wave of risk-off sentiment.

The benchmark Kospi sank 7.2% in its worst session since August 2024, as the market reopened after a holiday. Chip heavyweights Samsung Electronics Co. and SK Hynix Inc. dragged the gauge lower, dropping at least 9.9% each.

A prolonged war could be a major test of the world-beating rally in Korean equities, with the Kospi still up 37% this year. Samsung and SK Hynix powered much of the gains on the back of surging global memory amid the artificial intelligence boom. Tuesday’s drop shaved around $170 billion in combined market cap from the duo, unnerving investors who had jumped into the rally betting the gains will extend.

“An extended conflict involving Iran risks keeping crude prices elevated, reinforcing upside inflation risks and complicating the Federal Reserve’s path toward policy easing,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global. “That macro backdrop is weighing on AI-linked equities, where stretched valuations are increasingly sensitive to shifts in rates and liquidity expectations.”

Airline and automaker stocks also declined Tuesday. Oil companies outperformed, while defense contractors Hanwha Aerospace Co. and LIG Nex1 Co. climbed more than 19% each.

Moves in Kospi futures briefly triggered a halt in program trading to help tamp down volatility. Kospi was the worst performer in the region. The MSCI Asia Pacific Index fell as much as 3%, the most since April last year.

Retail Buying 

Foreign investors led the selling in Seoul, offloading 5.4 trillion won ($3.7 billion) worth of Kospi stocks on a net basis, according to Korea Exchange data. Retail investors bought a similar amount — repeating a pattern seen in recent sessions and suggesting mom-and-pop traders are dip-buying with the record cash pile they had put aside.

“Some profit-taking can be expected” after the strong performance of Korean stocks this year, said Cameron Chui, an equity strategist at JPMorgan Private Bank. “Pullbacks represent buying opportunities provided that escalation in the Iran conflict remains manageable.”