On Wednesday local time, South Korean investors witnessed a historic market session: the Korea Composite Stock Price Index (KOSPI) closed at 5,093.54 points, down 12.06% from the previous day. This decline surpassed the 12.02% drop recorded on September 12, 2001—the day following the 9/11 terrorist attacks—marking the largest single-day fall in the index's history. Meanwhile, the Korea Securities Dealers Automated Quotations (KOSDAQ) index plummeted 14%, also setting a record for its worst daily performance.
Following Wednesday's close, the KOSPI's gains for 2026 narrowed to 20%, down from nearly 50%. The index had surged 75% last year, outperforming all other major global markets. Analysts pointed out that the Middle East crisis has exposed vulnerabilities in South Korea's export-oriented economy, which is highly dependent on energy imports from the region. The second consecutive day of sharp declines has also raised concerns about forced liquidations of leveraged positions.
Kim Dojoon, CEO of Seoul-based Zian Asset Management, explained that many market purchases rely on financing, particularly for large-cap stocks, where investors often contribute only 30–40% in margin. These positions now face forced liquidation. If declines continue on Thursday, few will be willing to catch the "falling knife."
Foreign investors led the selling wave for the second day in a row, driving the South Korean won sharply lower and pushing it close to 1,500 won per U.S. dollar. Market participants are now watching for potential government measures to stabilize the market.
Last week, South Korean President Lee Jae-myung listed his Seoul apartment for sale, signaling the government's determination to stabilize real estate prices. This move coincides with broader efforts to encourage capital flow from the property market into equities. Local media cited "presidential office sources" suggesting that Lee believes selling real estate to invest in stock ETFs could generate greater economic benefits than holding property.
Amid Wednesday's market plunge, Bank of Korea Governor Lee Chang-yong delayed his trip to Bangkok for an International Monetary Fund meeting and held an emergency session with the Ministry of Finance to assess recent financial market movements. The central bank stated afterward that volatility in exchange rates, interest rates, and stock prices may remain elevated depending on developments in the Middle East. It pledged to coordinate with the government if needed to prevent one-sided market sentiment.
The Financial Services Commission also convened an "emergency financial market review meeting" after the market close, chaired by its chairman, Lee Bang-yeon, and attended by officials from the Financial Supervisory Service and market experts. According to an official statement, participants attributed the market turbulence to a combination of rising Middle East geopolitical risks and profit-taking following the market's earlier strong gains.
The meeting concluded that a "trend-driven decline" is unlikely, given factors such as improved corporate earnings, expectations for proactive capital market policies, and continued inflows into the market. Lee Bang-yeon emphasized that authorities will strictly monitor and penalize any attempts to disrupt market order through false information or speculative trading, adopting a "zero-tolerance" approach. He also instructed relevant departments to closely monitor market movements and activate a 100-trillion-won (approximately 530 billion yuan) market stabilization fund if excessive volatility occurs.