Kospi Cuts Losses to Close Down 0.5% at 8,185 After Slumping More Than 4%; Kosdaq Drops 2.5%

After reports of a U.S.-Iran military clash

BOK’s hawkish hold added pressure

Kospi plunged more than 4% intraday

Late bargain buying emerged

Chip stocks led the recovery

South Korea’s Kospi swung wildly on May 28, tumbling more than 4% at one point before trimming losses to close slightly lower in the 8,180 range. Late bargain buying centered on semiconductor shares helped the benchmark recover much of its intraday decline.

Renewed military tensions between the U.S. and Iran, concerns over the index’s recent rally and a hawkish rate hold by the Bank of Korea were seen as key drivers of the volatility.

The Kospi closed at 8,185.29, down 43.41 points, or 0.53%, from the previous session. It opened 0.77% lower and slid as much as 4.71% in afternoon trading before recovering much of the loss on bargain hunting.

Foreign investors, who had been net buyers for the previous two sessions, turned sellers again and joined institutions in pushing the market lower. On the Kospi, foreigners sold 3.7059 trillion won ($2.68 billion) worth of shares and institutions sold 1.0356 trillion won ($750 million). Retail investors bought 4.5689 trillion won ($3.31 billion), helping cushion the decline.

Volatility intensified after reports that the U.S. carried out additional airstrikes on Iranian military facilities near the Strait of Hormuz and that Iran responded immediately. Expectations for a near-term agreement to end the war between the two countries faded, fueling risk aversion. The BOK also added pressure after keeping its benchmark rate unchanged at a monetary policy meeting while leaving open the possibility of future hikes.

Samsung Electronics, the market’s largest chip stock, fell 2.44%. The shares had plunged more than 6% intraday before paring losses late in the session. SK Hynix, which had been down more than 4%, reversed course to close 2.05% higher.

LG Energy Solution soared 15.25% after news that it signed an energy storage system battery supply contract worth about 2.4 trillion won ($1.74 billion) with U.S. energy company DTE Energy. The deal boosted expectations for an industry recovery and spurred rotation into other battery plays, including L&F, which rose 13.03%, Samsung SDI, up 7.3%, and Posco Future M, up 3.93%.

Among other large-cap Kospi names, HD Hyundai Heavy Industries fell 5.38%, SK Square lost 3.06%, Samsung C&T dropped 2.68%, Doosan Enerbility declined 2.4% and Hyundai Motor slipped 0.59%. Samsung Electro-Mechanics jumped 13.44%, while Samsung Life Insurance added 0.85%.

The Kosdaq closed at 1,104.36, down 28.77 points, or 2.54%, from the previous session. The tech-heavy index opened 0.24% higher, turned negative within about a minute of the open and extended losses through the session. It sank nearly 6% in afternoon trading and briefly fell to the 1,000 level.

On the Kosdaq, institutions sold 389.8 billion won ($282 million) worth of shares. Retail investors bought 135.4 billion won ($98 million), while foreigners purchased 318.7 billion won ($231 million).

Among top Kosdaq stocks by market value, Jusung Engineering fell 9.17%, Kolon TissueGene dropped 6.33%, Rainbow Robotics lost 4.37%, Samchundang Pharm declined 3.84% and Leeno Industrial slipped 3.32%. Peptron rose 11.3%, Ecopro BM gained 2.34% and Ecopro advanced 1.26%.

In Seoul’s foreign-exchange market, the won closed the daytime session at 1,502.8 per dollar, up 1.6 won from the previous session.

Ko Jeong-sam, Hankyung.com reporter jsk@hankyung.com