Index drops more than 4% at open before staging sharp recovery; foreigners net sell over 1 trillion won amid Middle East risks and expiry-day pressures; potential capital outflows ahead of SpaceX listing also weigh on sentiment

Employees work at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Thursday morning. The Kospi was down 322.48 points, or 4.30 percent, at 7,398.34 as of 9:04 a.m. [Yonhap]
Employees work at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Thursday morning. The Kospi was down 322.48 points, or 4.30 percent, at 7,398.34 as of 9:04 a.m. [Yonhap]

The Kospi plunged more than 4 percent in early trading Thursday, briefly falling below the 7,400 level, before staging a sharp rebound. The index later touched 7,800 but has since swung between gains and losses in an extremely volatile session.

According to Korea Exchange, the Kospi stood at 7,732.90 as of 10:27 a.m., up 2.08 points, or 0.03 percent, from the previous session. The index opened down 221.20 points, or 2.86 percent, at 7,509.62 and at one point slid as low as 7,394.46 before recovering.

The sell-off was driven largely by broad weakness on Wall Street, where renewed Middle East geopolitical risks weighed on sentiment. US consumer prices in May hit their highest level in nearly three years, though the reading came in line with market expectations and eased some investor concern.

Markets were rattled again after US President Donald Trump signaled the possibility of striking power plants inside Iran. Just before the South Korean market opened, reports emerged that Iran had completely blocked passage through the Strait of Hormuz in response to US airstrikes.

Risk appetite weakened sharply, sending West Texas Intermediate crude prices up more than 2 percent and pushing the dollar index above the 100 mark. The won opened at 1,525.5 won per dollar in Seoul, up 1.3 won from the previous session.

Several supply-and-demand factors are also set to amplify volatility. Thursday marks the first simultaneous futures and options expiry day since single-stock leveraged ETFs on Samsung Electronics and SK Hynix began trading in late May. The prospect of global capital flows ahead of the SpaceX listing has added another layer of uncertainty.

Foreign investors were net sellers of 1.1244 trillion won ($739 million) on the main board. Institutions and retail investors were net buyers of 11.9 billion won ($7.8 million) and 1.0513 trillion won ($691 million), respectively.

Samsung Electronics and SK Hynix each fell 4 to 5 percent in early trading before recovering, with SK Hynix reclaiming the 2 million won level and Samsung Electronics returning above 300,000 won during the session.

Among large-cap stocks, Samsung Electronics rose 0.33 percent and SK Hynix gained 3.13 percent, with SK Square up 0.59 percent and Samsung C&T advancing 0.74 percent. On the downside, Samsung Electro-Mechanics fell 0.72 percent, Hyundai Motor dropped 2.66 percent, LG Energy Solution declined 1.95 percent and Samsung Life slipped 2.31 percent.

The Kosdaq was up 18.52 points, or 1.95 percent, at 970.15 at the same time. The index had fallen as low as 937.17, down 14.46 points, or 1.52 percent, in early trading before turning positive.

On the Kosdaq, foreign investors were net sellers of 232.1 billion won ($152 million), while institutions and retail investors were net buyers of 135.7 billion won ($89 million) and 89.0 billion won ($58 million), respectively.

Among Kosdaq large caps, Alteogen surged 7.14 percent, Jusung Engineering jumped 8.54 percent, Kolon TissueGene gained 2.81 percent, Lino Industrial rose 2.37 percent and Wonik IPS soared 19.19 percent. Ecopro BM fell 2.49 percent, Ecopro dropped 1.13 percent and Rainbow Robotics declined 3.18 percent.

Han Ji-young, a researcher at Kiwoom Securities, said a sell-side sidecar was triggered in the Kospi market on Wednesday as well, and that sidecars — three sell-side and one buy-side — had been activated on four consecutive trading days since June 5, pointing to a significant expansion in market volatility. "Today is the first simultaneous futures and options expiry day since the single-stock leveraged ETFs on Samsung Electronics and SK Hynix were listed in late May, which means intraday shifts in the cash-futures supply balance could temporarily distort price movements across the Kospi, including semiconductor stocks," he said.

He added that demand from global institutional investors seeking to add SpaceX — set to list on Friday — to their portfolios could further amplify supply-and-demand volatility.


hajun825@heraldcorp.com