As Middle East tensions escalated following President Donald Trump’s 48-hour ultimatum, foreign investors offloaded over 3 trillion KRW (about 2 billion USD) worth of KOSPI stocks. This marked the second major sell-off in days, following the outbreak of U.S.-Iran hostilities on the 3rd.
A wave of selling hit leading sectors, particularly semiconductors and automobiles, causing the KOSPI to nosedive by more than 6%.
On Monday, the Korea Exchange reported the KOSPI closed at 5,405.75, plummeting 375.45 points (6.49%). Early trading triggered a circuit breaker, halting trades for the first time in ten days.
Foreign and institutional investors drove the market’s sharp decline. Foreign investors dumped 3.6754 trillion KRW (about 2.5 billion USD) in net sales, while institutions offloaded 3.8127 trillion KRW (about 2.53 billion USD).
The foreign sell-off, coupled with a strong dollar, pushed the won-dollar exchange rate above 1,510 KRW (about 1.01 USD) – a level not seen since the 2008 financial crisis.
Analysts note that KOSPI volatility spikes with each dramatic turn in the conflict, as foreign investors rush to sell.
Today’s foreign sell-off was the largest since the war’s outbreak on March 3, which saw 5.1490 trillion KRW (about 3.43 billion USD) in net sales. While foreign selling initially eased, Trump’s ultimatum reignited fears of a protracted conflict, spurring another wave of sales.
The sell-off targeted large-cap stocks, which are easier to liquidate, causing the index to plummet. Foreign investors focused on blue-chips like Samsung Electronics, selling 1.52 trillion KRW (about 1.02 billion USD), and Hyundai Motor, offloading 283 billion KRW (about 188 million USD). Consequently, Samsung shares fell 6.57% to 186,300 KRW (about 124 USD), while Hyundai closed down 6.19% at 485,000 KRW (about 323 USD).
However, market analysts view this foreign exodus as a war-time risk management strategy rather than a wholesale abandonment of the KOSPI.
The unexpected prolongation of the Middle East conflict has prompted risk mitigation strategies prioritizing KOSPI divestment. In volatile markets, riskier assets are often the first to go. Globally, the KOSPI is classified as an emerging market and is considered riskier than dollar-denominated assets.
Interestingly, while investors dump large-caps that recently surged, they’re simultaneously buying into sectors like machinery, cosmetics, and apparel, indicating a strategic rotation.
Since March, foreign investors have heavily sold semiconductors and automobiles. However, they’ve been net buyers in nuclear and shipbuilding sectors, including Doosan Enerbility at 427 billion KRW (about 284 million USD), HD Hyundai Heavy Industries at 222 billion KRW (about 148 million USD), and Samsung Heavy Industries at 197 billion KRW (about 131 million USD). They’ve also invested in biotech firms like Celltrion at 199 billion KRW (about 133 million USD) and Samchundang Pharm at 123 billion KRW (about 82 million USD).
Lee Sang-yeon, an analyst at Shin Young Securities, explained that the foreign sell-off in our market is a logical response to profit-taking pressures after high yields since January, combined with escalating global geopolitical tensions. It’s crucial to track how foreign capital is reallocating across sectors, rather than fixating on the net selling trend.