South Korean Stocks Plunge 6.5%, Retail Investors contrarianly Buy the Dip with Record 7 Trillion South Korean Won

Middle East tensions have comprehensively suppressed demand for risk assets, with the South Korean stock market falling sharply on Monday. Retail investors contrarianly Buy the Dip, with single-day net purchases reaching 7 trillion South Korean won, a record high. On March 23, the Korea Composite Stock Price Index (KOSPI) closed down 6.49%, marking the largest single-day decline since March 4, and is down 13% month-to-date. The South Korean won fell to 1517.3 against the dollar, its lowest level since March 2009. According to Xinhua News Agency, citing several Iranian media outlets including the Tasnim News Agency, the Islamic Revolutionary Guard Corps issued a statement saying that if the United States attacks Iran's power stations, Iran will launch reciprocal strikes against Israel's power stations and those in regional countries that supply power to US military bases. The risk of further escalation has sparked global market concerns about the deepening regional crisis, dealing a major setback to the South Korean stock rally previously driven by the AI boom. In response to market volatility, the South Korean government has acted quickly. Budget Minister candidate Park Hong-keun stated that the government will formulate a supplementary budget plan as soon as possible. Previously, the government and the ruling party had agreed on an additional expenditure plan of approximately 25 trillion South Korean won (about $16.6 billion) to aid groups affected by soaring oil prices. Meanwhile, Shin Hyun-song, the newly appointed Governor of the Bank of Korea on Sunday, stated that he will seek a monetary policy that maintains a "balance" among inflation, growth, and financial stability. Stock Markets Plunge Across the Board, Volatility Triggers Circuit Breakers The Korea Composite Stock Price Index (KOSPI) closed at 5405.75 points on Monday, plummeting 375.45 points, or 6.49%, reaching its lowest closing level since March 9. A circuit breaker (sidecar) was triggered during the session due to sharp volatility, the fourth time this month due to Middle East tensions, but the index continued its decline after the halt. Of the 927 traded stocks, only 53 rose while 864 fell, as the market almost entirely collapsed. Regarding heavyweight stocks, chip giant Samsung Electronics fell 6.57%, and SK Hynix dropped 7.35%. Battery and automotive sectors also broadly declined. Regarding capital flows, foreign investors net sold approximately 3.7 trillion South Korean won, becoming the primary force dragging the index down; institutional investors were also net sellers. Retail investors contrarianly Buy the Dip, with single-day purchases reaching 7 trillion South Korean won, a record daily high. The bond market also faced selling pressure. The yield on South Korea's benchmark 10-year government bond jumped 22.2 basis points to 3.880%, its highest level since November 2023, reflecting the dual reaction of rising expectations for fiscal expansion and declining risk appetite. Analysts: No Need for Excessive Pessimism, but Market Patience is Wearing Thin Huh Jae-hwan, an analyst at Eugene Investment & Securities, stated, "Hopes for an imminent end to the war are fading." He also noted that given the solid foundation of Asia's tech industry and the government's push for a supplementary budget, there is no need for excessive pessimism, "but market patience has become fragile." This round of decline has turned the KOSPI's year-to-date gains from prosperity to concern. Before the Middle East conflict broke out, the index had led global gains driven by AI themes, with its year-to-date increase reaching 28% at one point, but it has retraced 13 percentage points this month. On the policy front, whether the support from the supplementary budget can stabilize market confidence remains to be seen.