Korean stock markets, which showed higher volatility than global peers during both the early-year rally and post-war decline, are drawing attention for how quickly they may rebound following the ceasefire. As the U.S. and Iran agreed to a two-week ceasefire on May 8 Korea time, domestic markets have resumed a steep upward trajectory, raising the possibility of recovering previous highs depending on peace negotiation developments.
According to financial data provider Yonhap Infomax on Monday, the KOSPI fell 12.00% from 6,244.13 to 5,494.78 between February 27—just before the war broke out—and May 7, the day before the ceasefire agreement. The KOSDAQ also dropped 13.08% during the same period.
The declines stand out more starkly when compared to global markets. The KOSDAQ recorded the largest drop, while the KOSPI posted the third-largest decline after Indonesia (-13.05%). Vietnam (-9.13%), China's Shenzhen Composite (-8.25%), and Japan (-7.97%) followed.
Notably, the KOSPI and KOSDAQ declines significantly exceeded those of major U.S. indices: the Dow Jones Industrial Average (-4.74%), S&P 500 (-3.85%), and Nasdaq (-3.21%).
The early-year trend told a different story. Through February 27, before the Middle East war, the KOSPI surged 48.17% and the KOSDAQ rose 28.88%, ranking first and second among global indices respectively. The KOSPI's gain was more than double that of third-ranked Taiwan (22.27%). The steep rise meant an equally steep correction.
Korea's high dependence on crude oil due to its industrial structure is also cited as a factor in the amplified decline. The surge in international oil prices following the blockade of the Strait of Hormuz during the war weighed on markets.
However, market sentiment has reversed quickly since the ceasefire agreement. The U.S. and Iran effectively agreed to a two-week ceasefire on May 7 local time, the 39th day of the war. Both sides agreed that Iran would open the Strait of Hormuz for two weeks in exchange for the U.S. halting attacks on Iran.
Following this news on May 8, the KOSPI surged 6.87%, with cumulative gains of 7.50% from May 8 to 10. This was the third-highest gain after the Philadelphia Semiconductor Index (12.30%) and Taiwan (8.74%). The KOSDAQ rose 4.42% during the same period, ranking 12th in gains.
Going forward, Korean markets are expected to be driven by peace negotiation developments and corporate earnings. With first-quarter earnings season in full swing following Samsung Electronics' "super earnings surprise," additional upside momentum could emerge if major companies like SK hynix deliver better-than-expected results.
Given that the KOSPI reached an intraday high of 5,918.59 on May 10 before closing at 5,858.87, expectations are growing for a return above the 6,000 level.
"Despite macroeconomic uncertainty, the visibility of Korean corporate earnings is becoming more prominent," said Lee Kyung-min, a researcher at Daishin Securities. "With the KOSPI trading below its price-to-earnings ratio floor and entering deep value territory, an aggressive overweight strategy remains valid."
