The Korean stock market, which had been rebounding on hopes for a ceasefire, faced a setback following the breakdown of initial peace negotiations between the U.S. and Iran. While strong performances in the semiconductor sector are supporting the index’s lower levels, analysts suggest that the KOSPI’s ability to reclaim the 6,000-point mark hinges on the success of upcoming negotiations.
U.S. and Iran Confirm Differences on Nuclear Abandonment; Next Talks Uncertain
Financial industry sources reported on Monday that the KOSPI is expected to experience volatility this week, as concerns and hopes regarding the failed negotiations and potential ceasefire between the U.S. and Iran continue to mix.
U.S. and Iranian delegations engaged in marathon talks in Islamabad, Pakistan, on April 11-12, but ultimately failed to reach an agreement.
Vice President JD Vance, who led the U.S. negotiating team, stated that Iran refused to accept conditions for relinquishing its nuclear program. Iran, on the other hand, claimed that the U.S. demands were excessive, making an agreement impossible.
The U.S. is demanding a definitive commitment from Iran to abandon its nuclear weapons development and implement substantial technical dismantlement. Specifically, reports indicate that the U.S. has proposed the removal of 400 kg of uranium from Iran, maintenance of a 0% enrichment level, and control over the Strait of Hormuz.
Iran, however, views these demands as a violation of its sovereignty and has rejected them. No mention has been made of future meeting dates.
KOSPI Rises 9% on Foreign Investors’ Return; Record-Breaking Earnings Amid Uncertainty
As a result, the domestic stock market, which had risen on expectations of a two-week ceasefire and negotiations between the U.S. and Iran, now faces inevitable increased volatility. Last week, the KOSPI climbed from 5,377.30 to 5,858.87, marking a weekly gain of 8.96%.
Foreign investors, who had made net purchases totaling 35.8496 trillion KRW (about 24.1 billion USD) since the outbreak of war until the first week of April, returned to the market. In just one week, they bought a total of 5.084 trillion KRW (about 3.4 billion USD), setting a new record for weekly net purchases this year. These purchases focused primarily on Samsung Electronics (2.5135 trillion KRW, about 1.69 billion USD) and SK Hynix (1.7648 trillion KRW, about 1.18 billion USD).
Samsung Electronics reported a record-breaking operating profit of 57.2 trillion KRW (about 38.4 billion USD) for the first quarter of this year, clearly demonstrating the strength of the memory semiconductor supercycle. Analysts also expect SK Hynix to report an operating profit of around 40 trillion KRW (about 26.9 billion USD) for the same period.
According to FnGuide, based on the strong performances of Samsung Electronics and SK Hynix, the operating profit for KOSPI-listed companies in the first quarter is estimated to exceed a record 135 trillion KRW (about 90.7 billion USD).
Compromise Difficult, but Prolonged War Unlikely
Seo Sang-young, an analyst at Mirae Asset Securities, noted that the market assesses that all parties involved in the conflict, including Israel, the U.S., and Iran, have reached their limits. Therefore, the likelihood of additional ground troop deployments and prolonged warfare is low. However, given that the U.S. is demanding not only the removal of nuclear materials but also control over the Strait of Hormuz, reaching a compromise will not be easy.
It remains uncertain whether extreme volatility will resurface as it did before the announcement of the ceasefire.
The research center at Daishin Securities stated that over the next two weeks, both countries will inevitably engage in a psychological battle to maximize their respective interests. It should interpret that both nations have hinted at a broad agreement toward a ceasefire through the negotiations, and it needs to understand the discussions on specifics as a pre-agreement followed by discussion approach.
Samsung Securities’ research center commented that while discord during the negotiation process may cause temporary volatility, its overall impact on the market will be limited. The key variables moving forward will be the actual reopening of the Strait of Hormuz, which directly affects inflation and interest rates.
