Kospi drops over 2% as Middle East tensions flare, foreign selling streak hits 19 sessions

The Kospi tumbled more than 2% in early trading Thursday as escalating geopolitical tensions in the Middle East fueled a fresh wave of foreign selling. Foreign investors extended their net selling streak to 19 consecutive sessions, adding downward pressure on the market, while the won-dollar rate broke above 1,530 for the first time in about two months.

Korea Exchange data showed the Kospi opened down 177.67 points, or 2.02 percent, at 8,623.82, reversing course after four straight sessions of gains since May 28. As of 9:54 a.m., the index was trading 1.57 percent lower at 8,662.91.

Foreign investors led the decline, posting net selling of 1.8509 trillion won ($1.22 billion) and extending their selling streak to 19 consecutive sessions dating back to May 7. That marks the 10th-longest net selling run in history and the longest since a 30-session streak from March 5 to April 16, 2020 — the first such record in more than six years. Individual and institutional investors were net buyers of 1.4864 trillion won and 305.2 billion won, respectively.

The selloff reflected overnight losses on Wall Street, where US-Iran end-of-war negotiations showed no sign of progress. The Dow Jones Industrial Average fell 1.21 percent, while the S&P 500 and the Nasdaq Composite dropped 0.74 percent and 0.89 percent, respectively.

Rising crude oil prices and bond yields amid heightened Middle East tensions further stoked the selling. Iran's Islamic Revolutionary Guard Corps said it had struck US military installations — including an Air Force base in Kuwait and the US Navy's Fifth Fleet base in Bahrain — in retaliation for attacks on an Iranian oil tanker and a communications tower on Qeshm Island.

West Texas Intermediate crude futures settled up 2.4 percent at $96.02 a barrel as geopolitical risks intensified. Near the close of New York trading, the yield on the 10-year US Treasury note rose 0.03 percentage points to 4.49 percent, briefly topping the psychological threshold of 4.5 percent during the session.

Stronger-than-expected US employment data also raised the prospect of further interest rate increases, weighing on investor sentiment. Payroll processor ADP reported that private-sector employment rose by 122,000 in May, the largest monthly gain since January last year.

The domestic market faces additional headwinds from the renewed flare-up in Middle East tensions and an after-hours plunge in Broadcom shares. A sharp rise in the won-dollar rate, combined with sustained foreign selling, has continued to drag the index lower.

Among large-cap stocks, Samsung Electronics fell 2.77 percent, slipping back to the 350,000-won range a day after closing above 370,000 won for the first time in history. SK Hynix dropped 3.90 percent into the 2.2-million-won range. SK Square, SK Hynix's largest shareholder, fell 3.34 percent, while Samsung Electro-Mechanics, LG Energy Solution and Doosan Enerbility were down 2.32 percent, 1.02 percent and 0.20 percent, respectively.

Stocks that had rallied on expectations of cooperation ahead of Nvidia CEO Jensen Huang's visit to South Korea this week also retreated on profit-taking. LG Electronics fell 13.12 percent, Hyundai Motor dropped 4.80 percent and NAVER declined 8.56 percent. Samsung C&T, HD Hyundai Electric and Mirae Asset Securities bucked the trend, rising 3.60 percent, 1.81 percent and 3.98 percent, respectively.

The Kosdaq was trading higher. The index opened up 6.88 points, or 0.67 percent, at 1,032.91 and extended its gains through the morning. Foreign and institutional investors were net buyers of 22.9 billion won and 74.8 billion won, respectively, on the Kosdaq, while individuals were net sellers of 84 billion won.

Secondary battery stocks EcoPro BM and EcoPro rose 2.53 percent and 4.08 percent, respectively, while Alteogen gained 1.12 percent, Jusung Engineering surged 12.24 percent and Kolon TissueGene added 3.33 percent. Rainbow Robotics fell 4.33 percent, HLB slipped 0.96 percent and Peptron declined 1.11 percent.

The won continued to weaken sharply against the dollar, driven by foreign selling and geopolitical uncertainty. The won-dollar rate opened at 1,530.0 won, up 13.6 won from the previous session, marking the first time the rate topped 1,530 during intraday trading in about two months.