KOSPI Index Faces 6,000-Level Jitters Amid Middle East Uncertainty; FSC Ready With 100 Trillion Won Stabilization Plan

With airstrikes by the United States of America (US) and the State of Israel on the Islamic Republic of Iran, and the death of Iran’s supreme leader Ali Hosseini Khamenei, geopolitical risks from the Middle East are intensifying. As a result, the domestic stock market, which ushered in the KOSPI 6,000 era, is now facing a major test. In response, the financial authorities have immediately activated an emergency response system to minimize market shock, while the investment community is watching whether retail investors will step in with bargain buying during any short-term correction driven by geopolitical risk.
On the 1st, Lee Eog-weon, chair of the Financial Services Commission (FSC), presided over an "Emergency Financial Market Situation Review Meeting" at Government Complex Seoul to discuss the impact of the US and Israeli strikes on Iran on the domestic and global economies and financial markets. The FSC launched an Emergency Response Financial Markets Team, headed by its secretary general, and decided to maintain a 24-hour monitoring regime in coordination with related institutions.
Lee stated, "The situation in the Middle East is highly uncertain, and if the crisis is prolonged, it could affect the real economy," calling for heightened vigilance. As the domestic stock market will be closed on the 2nd for a substitute holiday, he instructed officials to closely track global market developments and respond in a timely manner when trading resumes on the 3rd. If necessary, the authorities plan to swiftly implement existing financial market stabilization measures (contingency plans), including a market stabilization program worth "100 trillion won plus alpha."
On the 27th of last month, the Korea Composite Stock Price Index (KOSPI Index) closed at 6,244.13, down 1.00% from the previous session, weighed down by record net selling by foreign investors. Foreign investors offloaded more than 7 trillion won in the Korea Exchange Securities Market (KOSPI market), putting pressure on the index, but retail investors provided support to the downside by net buying about 6.2 trillion won.
Accordingly, brokerages expect the market to open lower on the 3rd, making a short-term pullback almost unavoidable, but they also see strong potential for a swift rebound. Kim Seok-hwan, an analyst at Mirae Asset Securities, noted, "Given the geopolitical conflict, the domestic stock market is highly likely to open lower," but added, "As buying sentiment has strengthened during recent corrections, there is a high chance of an intraday reversal to the upside driven by retail inflows."
Kyung-soo Lee, an analyst at Hana Securities, likewise commented, "After Nvidia’s earnings announcement last week, the 12‐month forward price-to-earnings ratio (PER) has adjusted to around 21.2 times, easing valuation pressures," and predicted, "If geopolitical risks related to Iran are contained and additional earnings momentum emerges from Broadcom’s earnings surprise, the recovery will likely be pronounced, particularly in the US market."
The virtual asset market wobbled in the early phase of the risk event but is now showing a rapid recovery. Bitcoin (BTC) was trading around 66,913 dollars as of the afternoon of the 1st, moving sideways compared with the previous day, while Ethereum stood at 1,993 dollars, up 1.46%, showing strength. This is seen as reflecting demand from investors choosing virtual assets as an alternative to fiat currencies during geopolitical crises.
Seo Sang-young, an analyst at Mirae Asset Securities, explained, "Bitcoin plunged to the 63,000‐dollar level immediately after the US and Israeli attacks on Iran, but rebounded after news of Khamenei’s death and has now recovered to the 66,000‐dollar range," adding, "The market appears to be expecting that this crisis could be resolved within a short period."

elikim@fnnews.com Kim Mi-hee Reporter