[Iran Crisis] Korean stocks and currency both plummet; Korean won drops over 1% and falls below 1,500 to 1 USD, hitting a new low since the financial crisis; 10,000 won equals 51.37 HKD

Amid the Middle East conflict, South Korea’s stock market was reportedly hit hard on Tuesday (the 31st) as global investors pulled out, sending prices toward their worst monthly performance since the global financial crisis, while the South Korean won slid to a new low after the global financial crisis.

Korea’s benchmark equity index KOSPI fell 4.3% on Tuesday, and the cumulative decline since its all-time closing high reached in late February has now totaled 19.9%. A 19% month-on-month drop is the biggest since 2008.

The won plunged more than 1% on Tuesday, slipping below the 1,500 level against the U.S. dollar and briefly weakening to around 1,536.7. This level had previously appeared only during the 2009 global financial crisis and in the late 1990s during the Asian financial crisis. As of 9:00 p.m. Hong Kong time on Tuesday, the won was still down 0.6%, with 1 U.S. dollar buying 1,525.55 won, and 10,000 won exchanging for HK$51.37.

Reuters reported that earlier strength in the market this year ended up exacerbating the extent of the brutal selloff, as surging energy prices and a retreat in risk appetite left global investors with no place to hide, forcing them to quickly dump assets that had previously been favored.

Exchange data showed that this month, foreign investors net-sold KOSPI stocks worth 359 trillion won (US$23.5 billion), the largest-ever scale of capital outflow, and it also pushed the won lower.

Rajiv Batra, JPMorgan Asia’s head and co-head of global emerging markets equity strategy, said that this wave of selling is driven by position adjustments.

“The market is not looking deeply at how badly economic growth has been hurt, or how badly profits have been hurt… No matter how big investors’ positions are, as long as that capital is currently in profit, that’s where investors begin de-risking.”

Citing Goldman Sachs analysis, Reuters said that the most aggressively sold targets by foreign investors are the chip manufacturers Samsung Electronics (KOR: 005930) and SK hynix (KOR: 000660), driving the foreign ownership ratios of both companies down to their lowest levels since 2022. The two companies fell 5.2% and 7.6%, respectively, on Tuesday, and their combined losses across the whole of March have both exceeded 20%.

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