Why South Korea’s KOSPI only fell 12%

Rising geopolitical tensions amid the war in Iran are part of the reason for South Korea’s worst stock market crash in decades.

South Korea’s stock market index, the KOSPI, saw a significant decline during the last trading session, falling more than 12%. Undoubtedly, this latest decline represents a significant increase in previous market movements and reflects the increasing volatility of local stock markets during the war in Iran.

Worst stock market crash since 2008

As of Wednesday’s publication, the KOSPI is down more than 12%. In the previous trading day, the benchmark index lost another 7%, its worst performance since 2008.

Both the Kosdaq and the KOSPI were on the brink of an emergency power outage on the Korean bourse, prompting a 20-minute trading halt.

Lorraine Tan, director of Asia equity research at Morningstar, explained the issue in a CNBC report, saying:

“The decline in the KOSPI can be largely attributed to the single-name concentration we are seeing in the Korean markets. (…) We believe the decline in stock prices is partly due to profit-taking after strong progress in the risk environment, but also reflects growing concern that the pace of AI data center adoption is slowing due to its significantly higher energy costs than conventional data centers.”

Additionally, analysts note that South Korea’s economy is highly sensitive to oil prices, making it even more vulnerable during a war in the Middle East.

Global tensions in the markets

Japanese markets are also under pressure. Japan’s leading stock market index, the Nikkei, fell more than 5% in the past 48 hours, while the US stock market managed to recover somewhat after statements from relevant parties.

Crypto markets remain flat on the day. Bitcoin is up 0.6% in the last 24 hours, while most altcoins are trading between -1% and +1%. According to CoinMarketCap, the total market capitalization is about $2.3 trillion, down 0.1% on the day.

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