Stocks tank as Middle East tensions spark sell-off

The main Kospi bourse fell 1.63 percent on Friday to close at 2,591.86 as investors shed risky assets with worsening tension in the Middle East.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 2,591.86 points on Friday, down 1.63 percent, or 42.84 points, from the previous trading session. The won fell against the dollar. [NEWS1]

Stocks plummeted by more than 1.5 percent on Friday as investors shed risky assets on escalating tensions in the Middle East, while the won fell sharply against the dollar.

The benchmark Kospi dropped 42.84 points, or 1.63 percent, to close at 2,591.86, trimming some of the losses after falling more than 3 percent during mid-trading. The index hit a low of 2,553.55 at around 11:25 a.m., the lowest point since Feb. 2 when it reached 2,559.39 during the session.

Trade volume was high at 799 million shares worth 13.85 trillion won ($10 billion), with losers outpacing gainers 629 to 238.

Foreigners bought a net of 343.9 billion won, while retail investors dumped a net 925.6 billion won. Institutions offloaded a net 655.7 billion won.

In the latest development in the Israel-Iran conflict that began earlier this month, media outlets have reported that Israel conducted a retaliatory attack on a target in Iran.

Investors also opted to offload local stocks amid speculation that the Federal Reserve might postpone early rate cuts. Some market watchers even suggest that the central bank might consider raising rates instead.

New York Federal Reserve President John Williams said in Washington on Thursday that there is no "urgency to cut interest rates," citing robust U.S. Inflation.

"Stock prices are reacting excessively, considering the factor does not go beyond expectations," said Han Ji-young, an analyst from Kiwoom Securities.

Shares lost ground across nearly all sectors, with Samsung Electronics falling 2.51 percent to 77,600 won and chipmaker SK hynix losing 4.94 percent to 173,300 won.

KB Financial decreased 0.47 percent to 63,700 won, while Shinhan Financial slid 1.91 percent to 41,750 won.

Pharmaceutical companies were also among the major losers, with Samsung Biologics plunging 1.14 percent to 781,000 won and Celltrion moving down 2.37 percent to 172,900 won.

Amid the geopolitical tensions, Korean Air Lines dipped 1.46 percent to 20,250 won and Asiana Airlines plunged 2.59 percent to 10,740 won.

The local currency ended at 1,382.2 won against the greenback, up 9.3 won from the previous session's close. The won, which had been rebounding over the last two days since the won-dollar exchange rate hit a 17-month low on Tuesday, plunged once again following the latest development in the Iran-Israel conflict.

The Kosdaq dropped 13.74 points, or 1.61 percent, to close at 841.91.

Amidst growing geopolitical uncertainties, Economy Minister Choi Sang-mok, who is currently on a visit to Washington, chaired an emergency meeting to monitor the possible implications of the Iran-Israel conflict on the Korean economy on Friday.

No direct disruption in the supply chain has occurred yet, according to the Ministry of Economy and Finance. However, the ministry vowed to closely monitor the situation through an emergency response team.

BY SHIN HA-NEE, YONHAP [shin.hanee@joongang.co.kr]