South Korean investors are in a state of panic as their once-world-beating stock gains have vanished overnight. The KOSPI stock index, a key indicator of the country's market performance, has plummeted by over 12%, marking its worst-ever sell-off. This dramatic drop has sent shockwaves through the financial district, particularly in Seongnam, a high-tech hub known as the Korean Silicon Valley. The usually bustling area was eerily quiet during lunchtime as investors grappled with the sudden market downturn.
The crisis can be traced back to the escalating conflict in the Middle East and the subsequent spike in oil prices. South Korea, heavily reliant on imports for its energy needs, has seen its KOSPI soar to record peaks in recent months due to the AI boom. However, with the war's impact on oil prices, this boom has now turned into a bust. Chipmakers Samsung Electronics and SK Hynix, once the leaders of the market rally, have seen their stocks plunge by 20% each this week, wiping out billions in market value.
The KOSPI's decline has been steep, with a combined 18.4% drop after Tuesday's 7.2% tumble, resulting in a staggering loss of 817.6 trillion won ($553.82 billion) in market value. Today, only 14 out of 925 traded issues on the KOSPI managed to avoid the downward spiral. The local currency, the won, also took a hit, briefly weakening past the 1,500 mark against the U.S. dollar, a psychologically significant threshold.
Despite the turmoil, some sectors have shown resilience. Daesung Energy, an LNG provider, saw its stock jump by the daily limit of 30% after Iran's announcement of a blockade in the Strait of Hormuz. However, not all stocks followed this pattern, with some surprising drops, such as Hanwha Aerospace, which saw an 8% drop despite a 20% jump the day before due to valuation concerns. The situation has left investors and analysts alike grappling with the sudden shift in market dynamics, prompting questions about the future of South Korea's stock market and the impact of global geopolitical tensions.
