#AsiaPacificStocksTriggerCircuitBreakers

The escalating Iran-US conflict has sent shockwaves through Asia Pacific financial markets, triggering circuit breakers across multiple exchanges and erasing billions in market value. South Korean markets experienced their worst single-day decline in history, with the benchmark KOSPI plunging over 12 percent and the secondary KOSDAQ tumbling 14 percent, forcing the Korea Exchange to activate circuit breakers on both markets in a single trading session for the first time since August 2024.
The KOSPI closed at 5,093.54, shedding 698.37 points or 12.06 percent, marking a steeper decline than the panic selling following the September 11, 2001 terrorist attacks. The index fell as low as 5,059.45 during intraday trading, down 12.65 percent, setting a new record for intraday drop. The KOSDAQ finished at 978.44, plunging 14 percent and falling below the psychologically critical 1,000 level for the first time in months.
Trading was suspended for 20 minutes on both exchanges after circuit breakers were triggered when declines exceeded 8 percent for more than one minute. This marked the seventh circuit breaker activation in KOSPI history and the eleventh for the KOSDAQ. Sell-side sidecars were also activated to temporarily halt program trading and stabilize the markets.
Major heavyweights suffered devastating losses. Samsung Electronics plunged 11.74 percent, while SK hynix fell 9.58 percent. Hyundai Motor dropped 15.8 percent, and LG Energy Solution declined 11.58 percent. Even defense stocks, which had posted strong gains the previous day on war optimism, retreated sharply with Hanwha Systems falling nearly 21 percent.
The Korean won weakened sharply against the US dollar, briefly breaching the 1,500 won per dollar threshold for the first time in 17 years since March 2009 during the global financial crisis. The currency closed at 1,476.2 per dollar, weakening by 10.1 won from the previous session after touching 1,505.8 in overnight trading. Historically, the 1,500-won level has appeared only during major financial turmoil, including the 1997 Asian financial crisis.
South Korea's vulnerability stems from its position as the world's fourth-largest crude oil importer, heavily dependent on energy supplies from the Middle East. The conflict has sent oil prices surging over 10 percent this week, fanning inflation fears and raising concerns about export-dependent economies. The KOSPI had soared more than 50 percent this year and over 75 percent last year, driven by semiconductor heavyweights on strong AI chip demand, making the correction particularly severe.
The selling pressure was driven primarily by institutional investors, who dumped 588.8 billion won worth of shares. Retail investors and foreigners were net buyers of 79.7 billion won and 231.2 billion won respectively, but their purchases proved insufficient to stem the decline.
The turmoil extended well beyond South Korea. Japan's Nikkei 225 fell more than 4 percent, with chipmakers Advantest and Tokyo Electron losing similar amounts. Hong Kong, Sydney, Singapore, and Taipei all declined more than 2 percent. Bangkok tumbled 8 percent, also triggering a trading halt. Shanghai, Wellington, Manila, and Jakarta all traded deep in negative territory.
India's stock market crashed as well, with the benchmark Sensex and Nifty 50 trading over 2 percent lower amid heavy losses across sectors. Investors lost approximately 12 lakh crore rupees as the overall market capitalisation of BSE-listed firms dropped.
The MSCI Asia Pacific Index fell for the third consecutive day, recording its steepest two-day decline since April of last year. Analysts noted that risk-off sentiment swept through the region as investors grew increasingly concerned that the Middle East conflict could escalate into a prolonged region-wide war.
Foreign investors led the sell-off across the region, having net sold Kospi stocks valued at over 4 trillion Korean won in previous sessions. The flight to safety strengthened the US dollar as a traditional safe haven, with the dollar index extending its rally.
Bond markets reflected the anxiety, with 10-year US Treasury yields climbing to around 4.06 percent as traders reduced bets on Federal Reserve rate cuts, concerned that sustained conflict could trigger new inflationary pressures.
Despite the devastation, some analysts see opportunity. Kiwoom Securities advised investors that rather than reducing exposure, they should respond by purchasing leading stocks that have plummeted. Researcher Han Ji-young noted that the utility of reducing equity exposure at this point is not significant, emphasizing that the magnitude of this plunge appears excessive based on stock price decline rates alone.
Historical data supports this view. Kiwoom Securities analyzed that indices tend to rise following circuit breaker activations, with average returns of 3.4 percent after five trading days and 7.7 percent after twenty trading days. The KOSPI's forward price-to-earnings ratio has rapidly fallen to around 8.1 times, historically a level seen only during major crises including the financial crisis, European fiscal crisis, and pandemic.
Daishin Securities offered similar analysis, projecting that based on past circuit breaker cases, the KOSPI rebounds an average of 9.9 percent after 32 trading days from the trigger and approaches 20 percent around 60 trading days. Analyst Jeong Hae-chang noted that circuit breakers have historically appeared near psychological bottoms, with current valuations representing an excessively compressed zone.
Looking at geopolitical shocks specifically, Daishin found that by the time 20 trading days passed after war outbreaks, indices rose an average of 3.6 percent, returning to recovery trajectories. While short-term declines continued up to 10 trading days in cases such as 9/11, the Israel-Lebanon war, and the Russia-Ukraine war, rebound trends consistently emerged by the 20th day.
The key variable remains duration. Market strategists emphasize that if the Iran conflict remains relatively short-lived, the pullback represents a buying opportunity. However, if it becomes protracted with sustained oil price elevation, inflation risks could complicate central bank policy paths and prolong market instability.
For now, Asia Pacific markets remain on edge, watching Middle East developments closely while grappling with the most severe test of regional financial stability since the pandemic. The coming sessions will reveal whether this represents a historic buying opportunity or the beginning of a deeper, more prolonged correction.
#AsiaPacificStocksTriggerCircuitBreakers