A 2,500-point plunge! Circuit breaker triggered! What happened to the Japanese and Korean stock markets?

On the 30th, the stock markets in Japan and South Korea opened significantly lower. The Nikkei 225 index at one point fell by more than 5%. As of the midday trading break, it was at 50,936.13 points.

Market analysts said that over the just-concluded weekend, tensions in Iran had not eased. Oil prices continued to surge on Monday, which is bad news for Japan and South Korea because they are highly dependent on energy supplies from the Middle East.

As prices fell to the lower bound of the trading range, Japanese TOPIX Growth Market 250 index futures triggered a circuit-breaker mechanism and resumed trading at 8:55 a.m. local time. For individual stocks, SoftBank Group fell by more than 8% at one point, while Toyota, Mitsubishi UFJ Financial Group, Hitachi, and others also fell by more than 4% at one point.

The South Korean KOSPI index fell by more than 4%, and in early trading it at one point dropped by more than 5%. In terms of heavy-weight stocks, SK hynix, Hyundai Motor, Doosan Enerbility, and others all fell by more than 6% at one point. On the news front, Korea Development Bank (KDB) said in a statement on Sunday that the bank, the Export-Import Bank of Korea, and Korea National Oil Corp. had held an emergency meeting last Friday to coordinate responses to the energy shock triggered by the Iran war.

Relevant officials said that, driven by supply disruptions, rising bond yields, and a stronger U.S. dollar, the risk of an “energy–financial compound crisis” is continuing to intensify. The above-mentioned banks will review financing support plans for Korea National Oil Corp., covering areas such as liquidity for crude oil procurement, repayment of overseas debt, import financing, FX hedging, and working-capital loans. The goal of this support initiative is to ensure this Korean state-owned oil company has the funding for crude oil procurement, and to help stabilize oil prices by lowering financing costs.

Global oil prices continue to rise. In early trading today, both New York crude oil futures and Brent crude oil rose by more than 3%. As of 11:01 a.m. Beijing time, New York crude oil was at $101.51 per barrel, and London Brent crude oil was at $115.50 per barrel. Among them, Brent crude oil futures broke through $116 per barrel during the trading session and approached the highest intraday level since the outbreak of the U.S.-Iran war.

Japanese and South Korean stock markets plunged at the open. Will this weigh on China’s A-share market? Industry insiders analyzed that the stability of China’s new energy and manufacturing sectors is not comparable to that of the former. Dongwu Securities suggested looking for medium-term certainty amid volatility in geopolitical expectations. First, it is important to focus on “energy security,” and the “transmission of oil price central tendency” is expected to be upgraded into one of the medium-term main themes. Second, it is advisable to build positions on dips in directions where the logic of business conditions is relatively independent and earnings per share growth is driving, including gas turbine engines, lithium battery equipment, domestic computing power, expansion of domestic advanced process capacity, cloud computing, liquid cooling, and certain base metals (such as tungsten, tantalum, and lithium), among other sectors.

CITIC Securities believes that, from the perspective of the direct impact of this event, there are three areas that the market should pay attention to next: the acceleration of global electrification, overseas orders shifting back to domestic suppliers, and supply-chain security.

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