The escalation of geopolitical risks in the Middle East is impacting the Asian financial markets. South Korea's financial market experienced a significant sell-off on Monday, with the stock market plummeting, triggering a circuit breaker, and the Korean won nearing a critical devaluation threshold.
Sharp Decline in South Korean Stock Market
According to Refinitiv data, as of 0219 GMT, the Korea Composite Stock Price Index (KOSPI) fell 455.45 points to 5129.42 points, a drop of 8.16%.
This is the second time this month that South Korea's stock market has triggered a circuit breaker. Last Wednesday, the market experienced its first circuit breaker since August 2024.
KOSPI fell 10.6% last week, marking the largest weekly decline since March 2020 when the global pandemic impacted the markets.
The technology and battery sectors led the decline:
Samsung Electronics fell 9.88%
SK Hynix dropped 10.93%
LG Energy Solution fell 6.49%
The market witnessed a broad downturn, with only 55 out of 927 traded stocks posting gains.
Korean Won Hits New Low Since Financial Crisis
In the foreign exchange market, the Korean won continued to depreciate against the US dollar.
In offshore trading, the US dollar was quoted at 1497.7 won, a daily decline of approximately 1.1%. Last week, the won briefly touched the 1500 mark, reaching its lowest level since the global financial crisis in March 2009.
Bond Yields Rise
South Korean government bond yields rose in tandem:
The yield on three-year government bonds rose to 3.469%
The yield on ten-year government bonds increased to 3.763%, up 14.7 basis points during the day
The rise in yields reflects market concerns about capital outflows and increased risk premiums.
Central Bank Prepares to Intervene in the Market
The Bank of Korea stated that the volatility in the bond and foreign exchange markets has significantly increased, and authorities will take stabilization measures as deemed necessary.
Analysts believe that if the won breaks the 1500 mark, the Bank of Korea might intensify its foreign exchange interventions to prevent accelerated capital outflows.
