Stocks gain on U.S.-Iran peace deal, though uncertainty remains
While the stock market regained stability after the United States and Iran announced that they had reached a peace deal, analysts warn against ruling out future volatility and dismissing inflation concerns.
A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 8,545.98 points on June 15, up 422.36 points, or 5.2 percent, from the previous trading session.NEWS1
The stock market regained stability following the agreement to end the Middle East crisis, raising hopes that the Kospi could reach the 9,000-point mark, as oil prices stabilize and shipments through the Strait of Hormuz resume.
The Kospi closed at 8,545.98 on Monday, up 5.2 percent from the previous session. Strong buying pressure after the market's open triggered a buy-side sidecar, which temporarily suspended program buy orders for 5 minutes. A sidecar halts program trading when certain market indexes fluctuate beyond a designated threshold.
Compared to the Kopsi's closing level of 6,244.13 on Feb. 27, just before the war began, the index has risen 36.86 percent.
Analysts said that the market, supported by strong corporate earnings, performed relatively well despite geopolitical uncertainty and surging oil prices.
"As macroeconomic uncertainties, including tensions in the Middle East, ease, the market can once again focus on corporate earnings, which drive stock prices," Kim Dae-jun, an analyst at Korea Investment & Securities, said.
"Listed companies are projected to have cumulated second-quarter operating profit of 225 trillion won [$148.6 billion], and based on earnings alone, the Kospi has room to climb further."
Foreign investors are also returning to the market.
After posting net sales for 24 consecutive trading sessions since May 7, foreign investors recorded net purchases both last Friday and Monday. They purchased a net 986 billion won worth of stocks on Monday.
Analysts said that liquidity concerns have eased, as capital expected to flow into the highly anticipated SpaceX listing has largely already moved.
"The biggest factor behind the change in foreign investor flows is the easing of supply shocks caused by megasize initial public offerings [IPOs]," Kim said. "Historically, once a mega IPO concludes, extreme concentration in market liquidity tends to ease, and foreign investors return to existing assets with stronger growth prospects."
People celebrate the Kospi surpassing the 8,000-point mark for the first time at the Korea Exchange headquarters in Yeouido, western Seoul, on May 26.YONHAP
Some indicators, however, have yet to return to prewar levels.
The V Kospi, often referred to as Korea's fear gauge, remained high at 87.73 as of Monday's close. It reached a record high of 91.23 on last Tuesday and climbed as high as 94.25 during intraday trading. Before the war, the index typically traded in the 40 to 50 range.
Inflationary pressures stemming from disruptions in the Strait of Hormuz also continue to weigh on markets.
The yield on the benchmark 10-year U.S. Treasury bond stood at 4.436 percent as of 3:30 p.m. on Monday, down 0.047 percentage point from the previous session. The yield was in the low 4 percent range before the war, suggesting a slower-than-expected return to prewar levels.
Investor caution also remains ahead of upcoming monetary policy meetings by the Bank of Japan on Tuesday and the U.S. Federal Open Market Committee on Wednesday.
"Although oil prices have fallen below $85 per barrel, bond yields and the dollar-won exchange rate have retreated only slightly from their recent highs," Lee Kyung-min, an analyst at Daishin Securities, said.
"Macroeconomic risk indicators continue to signal a risk-off environment, meaning the possibility of further market volatility can't be ruled out."
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
