South Korea's Kospi tumbles 10% as Iran conflict fuels market chaos
South Korea's stock market has seen wild swings in recent weeks as geopolitical tensions escalate. The Kospi index, which hit a record high of around 6,300 points in late February, has since dropped by roughly 10.4% amid the Iran conflict. Investors are now split between bold bets and growing caution as volatility spikes.
The market turbulence began after the Kospi peaked on February 25. By March 25, the index had fallen to 5,642 points, with daily drops reaching up to 12% before partial recoveries of 9.6%. The conflict in Iran has driven instability in oil prices, exchange rates, and interest rates, pushing traders to react swiftly.
Individual investors responded aggressively in early March. On the first trading day after the war broke out, they bought 5.8 trillion won ($4.2 billion) worth of Kospi stocks. From March 1 to 24, their net purchases totalled $18 billion, countering heavy selling by foreign investors. Some traders, dubbed as having a 'heart of a beast,' have doubled down, chasing high returns despite the risks. Yet the surge in risky bets has raised alarms. Investment in leveraged and inverse ETFs jumped 75% to 21.7 trillion won ($15.8 billion) by March 10. Margin lending also soared past 33 trillion won ($24 billion) this month, but forced liquidations due to unpaid margin calls reached 4.1 trillion won ($3 billion) by Monday. Data shows leveraged investors suffered average losses of 19% from March 1 to 9—more than double the losses of those using their own funds. Online debates have intensified over whether the Kospi will rebound. Optimists argue the index will regain momentum after briefly surpassing 6,000 in late February. Others warn that reckless trading in such unpredictable conditions could lead to steep losses.
The Kospi's sharp decline and rapid shifts have left investors divided. While some continue to bet heavily on a recovery, the risks of leveraged trading and margin calls are becoming clearer. With volatility still high, market watchers are closely monitoring how traders will navigate the ongoing uncertainty.
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