Doha [Qatar], April 17: KOSPI is staging a strong rebound, shaking off the fallout from the Middle East conflict as optimism grows over potential peace talks between the United States and Iran, analysts said Thursday.
Improving investor sentiment has also fueled a renewed surge in leveraged stock investment, pushing margin loans to fresh record highs.
The country's benchmark index extended its rally to a third straight session after reclaiming the 6,000 level Tuesday for the first time since March 3.
The index opened at 6,149.49, up 58.10 points, or 0.95 percent, from the previous session, and continued to climb, closing above the 6,200 mark at 6,226.05, up 134.66 points, or 2.21 percent.
The move marks the first time the index has revisited the 6,200 range since Feb. 27, just ahead of the outbreak of the US-Iran conflict.
The tech-heavy Kosdaq also got off to a strong start, opening at 1,163, up 10.57 points, or 0.91 percent, and closed at 1,162.97, up 10.54 points, or 0.91 percent.
The rally was attributed to a combination of factors, including a series of media reports indicating progress in peace negotiations and rising expectations for upcoming earnings announcements from major technology firms.
As the market rebounds, retail investors are increasingly turning to leverage. Data from the Korea Financial Investment Association showed that margin loans tied to KOSPI-listed stocks reached a record 23.04 trillion won ($16 billion) as of Tuesday, marking a new all-time high.
The increase has been rapid, with the balance climbing by about 500 billion won in the week since April 8, when it stood at 22.57 trillion won.
Combined margin debt across both the KOSPI and Kosdaq has climbed to 33.28 trillion won, approaching the all-time high of 33.7 trillion won recorded on March 5.
Market experts, however, cautioned against excessive optimism, warning that elevated leverage heightens the risk of forced liquidation if volatility returns. In such a scenario, losses for individual investors could escalate quickly.
"Although hopes for an end to the conflict are supporting sentiment, external uncertainties, including ongoing geopolitical noise tied to Trump, remain," said Lim Jung-eun, a researcher at KB Securities. "Market direction will hinge on whether corporate earnings momentum materializes as the season unfolds." Noh Dong-kil, a researcher at Shinhan Securities, added, "The ceasefire remains fragile, and the Strait of Hormuz is still effectively blocked. As the ceasefire deadline approaches, risk premiums could rise again." In the Seoul foreign exchange market, meanwhile, the won also opened stronger at 1,473.6 won per dollar, up 0.6 won from the previous session, supported by improving risk sentiment. It later pared gains and weakened toward the end of the session, closing onshore trading at 1,474.6 won per dollar, down 0.4 won from the previous session.
Global oil prices showed little movement. Brent crude for June delivery settled at $94.93 per barrel, up 0.1 percent, while West Texas Intermediate for May delivery edged up by just 1 cent to $91.29, reflecting a pause in recent volatility.
Korea's foreign exchange market will stabilize once risks stemming from tensions in the Middle East are resolved, Finance Minister Koo Yun-cheol said.
"If risks related to the Middle East conflict are resolved, the market will regain stability," the minister told reporters in Washington on Wednesday (U.S. time), according to the finance ministry.
Koo is currently on a visit to the U.S. to attend a meeting of Group of 20 finance ministers and annual gatherings of the International Monetary Fund and the World Bank.
The finance minister insisted that the Korean won, which he said has diverged excessively from economic fundamentals, is expected to return to "normal" levels once the government's major foreign exchange policies are put in place.
When asked what level would be considered normal, Koo said it was difficult to specify because foreign exchange rates are determined by the market. "Given the current conditions of foreign currency supply, foreign investors are showing strong interest in investing in the domestic market," he said.
Koo also emphasized the Seoul government's efforts to meet its national goal of 2 percent growth for this year.
"If the war ends as early as next week, the target may be achieved with relatively limited effort, but if it continues, broader policy responses will be required," he was quoted as saying.
"With international organizations projecting growth at 1.9 percent, how quickly the Middle East conflict ends will be crucial," he added.
Source: Qatar Tribune
