South Korean Stocks Surge 9% With Intraday Double Circuit Breakers as Samsung Jumps 13%. Analysts Warn Market Recovery Is Far From Arriving.

TradingKey - On Wednesday (April 1), South Korea's KOSPI index surged by as much as 9% in late trading, breaking through the 5,500-point level and ending a four-day losing streak. Due to a 6% rise in KOSDAQ 150 index futures, the Korea Exchange triggered a circuit breaker mechanism, halting program trading for five minutes. Earlier in the morning session, a sharp intraday rally in KOSPI 200 futures also triggered a circuit breaker.

The gains in the South Korean benchmark were primarily driven by chip stocks, with Samsung Electronics jumping more than 13.5% intraday and SK Hynix surging over 11.5%.

Black March! 840 Trillion Wiped Out from South Korean Stocks

This rally was primarily driven by US stocks. On March 31, as both the US and Iran signaled a potential end to the conflict in the Middle East, US equities recorded their largest single-day gain since last May.

Ha SeokKeun, Chief Investment Officer at Eugene Asset Management, stated that the shift in global risk appetite was driven by the rally in US markets, with technology stocks leading the way to boost the Korean market. Furthermore, he noted that a technical rebound from the recent short-term oversold period is also playing a role, triggering short covering and dip-buying.

Looking back at market performance, Korean stocks were the world's best-performing market through February but fell to the bottom in March, primarily weighed down by stagflation concerns stemming from the war. According to Yonhap News Agency, the total market capitalization of listed Korean companies has been erased by approximately 840 trillion won over the past month due to the Middle East conflict.

In addition, Google (GOOG) (GOOGL) recently launched its new extreme compression algorithm, TurboQuant, which has also dampened market confidence in the semiconductor sector. Since Samsung Electronics and SK Hynix together account for roughly 40% of the total market capitalization of Korean stocks, these two equities essentially determine the trajectory of the broader Korean market.

As hopes for an easing of the US-Iran conflict grow, market sentiment is expected to improve further. Hiroshi Namioka, Chief Strategist at T&D Asset Management, said that while the possibility of a US withdrawal from Iran is now plausible, it remains difficult to place a definitive bet either way at this juncture.

Beware of Dead Cat Bounce: Why the Stock Market Outlook Remains Bleak?

Trump will deliver a national address on the U.S.-Iran conflict at 9 p.m. ET on Wednesday to provide important updates regarding Iran. Previously, Trump stated that the U.S. would end hostilities against Iran within "two to three weeks," which significantly boosted stock market sentiment.

Jung In Yun, CEO of Fibonacci Asset Management Global, stated that for those who still believe the regional conflict has not yet concluded, now is a good time to take profits. However, this does not guarantee further stock market gains; Jung In Yun believes that many uncertainties remain and energy prices could stay elevated through the end of the year.

Robert Pape, a political science professor at the University of Chicago, pointed out that since 80% to 90% of the crude oil transported through the Strait of Hormuz flows to Asia, the region will be the hardest hit by the economic impact of an Iran war.

Rob Subbaraman, an Asian economist at Nomura, even noted that the blow to global economic growth from an Iran war could arrive sooner and be more severe than during the 2022-2023 inflationary surge.

Matthew Haupt, a fund manager at Wilson Asset Management in Sydney, believes that as the U.S.-Iran conflict has already caused some damage, the market is expected to remain sluggish for a period of time. Haupt stated that while this stock market rebound qualifies as a relief rally of sorts and volatility has returned to normal levels, one should not have excessively high expectations for a full-scale return of risk appetite.

Brian Nick, head of portfolio strategy at Newedge Wealth, said that a market bottom would not be declared without clear signs of a resolution between the U.S. and Iran. Pape pointed to another indicator—the mobilization of military assets—which reflects Trump's intentions more accurately than public statements of intent, given the high cost of troop movements.

According to news from the U.S. Navy on March 31, the USS George H.W. Bush carrier strike group departed from Naval Station Norfolk, Virginia, on the U.S. East Coast that day to carry out a deployment. U.S. media reported that the carrier strike group will be deployed to the Middle East to participate in U.S. military operations against Iran. This may serve as proof that the hostilities have not yet reached an end.