The Kospi staged a roller-coaster session, plunging just before breaching the 8,000 mark intraday, with a daily swing of 570 points. Analysts attribute the move to fatigue from a sharp short-term rally, compounded by a resurgence of Middle East geopolitical risk, concerns over rising interest rates, and a wave of foreign selling ahead of the May 14 options expiry.
According to the Korea Exchange on the 12th, the Kospi closed at 7,643.15, down 2.29% from the previous session. The index jumped more than 2% at the open, surging to 7,999.67 at 9:02 a.m., before reversing sharply to fall as low as 7,421.71 by 10:40 a.m. — a 578-point swing within the first hour and 40 minutes of trading.
Profit-taking on short-term overheating was cited as the main driver of the selloff. The Kospi had climbed for five straight sessions through the previous day and surged 18.5% in May alone. Reflecting the profit-taking, leading stocks that had rallied sharply — including chipmakers and power equipment names — weakened across the board. Samsung Electronics fell 2.28%, SK Hynix 2.39%, and SK Square 5.14%, while Doosan Enerbility dropped 1.87%, LS Electric 4.93%, and Hyosung Heavy Industries 3.14%. Samsung Electronics and SK Hynix had soared to 294,500 won and 1.988 million won, respectively, before retreating.
Foreign selling amplified the downward pressure. Foreign investors dumped a net 5.6621 trillion won in the Kospi market on the day, the third-largest selloff on record, following those on Feb. 27 and May 7 this year. Over the four trading days starting May 7, foreigners sold a net 20.5276 trillion won. Analysts say the won-dollar rate, which spiked to 1,488 won, accelerated the selling, which in turn pushed the exchange rate even higher — creating a vicious cycle. Some in the brokerage industry suspect that foreign investors who had placed downside bets (shorting futures, buying put options) in the derivatives market ahead of the May 14 options expiry aggressively offloaded spot holdings as well. Individual investors, in contrast, net-purchased 6.6663 trillion won — the third-largest on record — extending their buying streak for the month.
The macroeconomic backdrop also chilled sentiment. On May 11 (local time), CNN, citing sources, reported that U.S. President Donald Trump is seriously considering resuming combat operations against Iran. West Texas Intermediate (WTI) crude climbed past $99 a barrel on the news. With surging oil prices stoking inflation concerns and raising the likelihood of higher interest rates, the yield on 10-year Korean treasury bonds spiked to 4.004% intraday, while the 10-year U.S. Treasury yield reached 4.422%.
Experts say that given how far the market has run, a full-scale correction could drag the Kospi down to the 7,000 level. Still, they advise against panic-driven trading, noting that earnings forecasts for domestic companies remain intact. Lee Kyoung-min, analyst at Daishin Securities, said, "Geopolitical risk concerns triggered the reversal amid overheating pressure from the short-term surge, but with valuations still attractive, this should be viewed as a phase of digesting supply."
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