[Good Morning Market] "Mixed on U.S. Hormuz Tensions... Korea Enters Unprecedented Volatility Phase"

The U.S. stock market closed mixed as geopolitical tensions surrounding the Strait of Hormuz persisted, despite the February Consumer Price Index (CPI) meeting market expectations. Analysts note that the Korean stock market has also entered an unprecedented phase of extreme volatility.

Yonhap News

On March 12 (local time) at the New York Stock Exchange, the S&P 500 Index closed at 6,775.80, down 0.08% from the previous day. The Dow Jones Industrial Average fell 0.61% to end at 47,417.27. In contrast, the tech-heavy Nasdaq Composite Index rose 0.08% to 22,716.14.

The February CPI released the previous day showed that both the headline index (2.4%) and the core index (2.5%) matched market expectations. However, this did not serve as a catalyst for a rally in the U.S. stock market. Analysts attribute this to the fact that the indices did not reflect the surge in oil prices that occurred after the Middle East conflict at the end of February. With energy inflationary pressures mounting and upward pressure on oil prices increasing, market participants appeared largely unresponsive to the data. Going forward, fluctuations in oil prices are expected to be a key factor influencing the direction of the stock market.

The Korean stock market is expected to show sectoral divergence today. Despite the International Energy Agency (IEA) releasing strategic reserves and the strong performance of U.S. semiconductor stocks such as Micron and Nvidia, factors such as changes in foreign investors' cash and derivatives positions due to quadruple witching, and issues related to the Strait of Hormuz, are likely to cap the index's upside.

The domestic stock market is, quite literally, a "roller coaster" at present. Over eight trading days this month, the KOSPI has experienced two circuit breakers (temporary halts due to sharp price movements) and five sidecars (temporary suspension of program trading), exhibiting a level of price volatility not seen before. This is interpreted as a result of aftereffects from the sharp rally up to late February, as well as heightened risk aversion due to the risk of war between the U.S. and Iran.

Volatility in the stock market is expected to continue this week as well. While the 11% correction from the peak since March is positive for the outlook of the Korean stock market, there are concerns that the influence of passive fund flows is growing and that issues stemming from the Middle East conflict will persist.

However, given that the KOSPI quickly priced in the negative news from the Middle East conflict, the 5,050 level, which marked last week's sharp decline, is seen as a possible short-term bottom. It is also somewhat positive that leading sectors such as semiconductors, shipbuilding, defense, and finance have shown relatively strong recovery. During the rebound following the KOSPI's plunge on the 4th, leading sectors such as securities (16.1%), machinery (15.9%), shipbuilding (15.8%), and semiconductors (11.2%) outperformed the KOSPI's return of 10.1%, ranking at the top in sector earnings.

Ji Young Han, a researcher at Kiwoom Securities, stated, "Even if volatility increases again due to potential developments in the Middle East, a practical approach would be to maintain a portfolio overweight in existing leading stocks or to respond with additional split purchases during adjustments."

Meanwhile, the previous day, the Korean stock market saw a strong intraday rally of over 3% as oil prices stabilized and Oracle's earnings surprise drove after-hours stock gains. However, the session ended mixed due to concerns over the Strait of Hormuz later in the session. The KOSPI closed at 5,609.95, up 1.40% from the previous day, while the KOSDAQ ended at 1,136.83, down 0.07%.

This content was produced with the assistance of AI translation services.