MW World's best-performing stock market of 2026 is the worst-performing in March
By Jules Rimmer
KOSPI index drops more than 4% on the last trading day of the quarter
The higher they go, the harder they fall: South Korea's KOSPI index dropped 19% in March as international investors were deterred by high valuations and retail punters deleveraged.
It's still the world's best performing stock market of 2026 but at this rate it won't be for much longer.
As February ended, South Korea's seemingly invincible KOSPI index was up almost 50% for the year. Come the last trading day of March, however, after a battering from energy prices and a reappraisal of its heavyweight semiconductor stocks, the Kospi KR:180721 has plummeted 19% and is on the brink of entering bear market territory. The iShares MSCI South Korea exchange-traded fund EWY started the month at $147 but in pre-market trading Tuesday, it's languishing at $114.
Prospects for investors and the economy are darkening.
The Iranian war has precipitated a crisis for South Korea's economy because it is so heavily dependent on energy imports. The 75% increase in Brent (BRN00) oil prices so far this year, and an average close to $100 in March, leaves Korea especially vulnerable as 94% of its fossil fuel requirements are met by imports. Almost three-quarters of its crude-oil imports originates in the Gulf and the supply disruption threatens to bring its economy to a shuddering halt.
Posting on X Monday, President Lee Jae Myung warned, "The world is in turmoil over the energy crisis...the situation is so serious that it has even kept me up at night. The immediate problem is grave enough, but the outlook ahead seems even more unstable - the situation is worse than expected."
The situation is so precarious that Prime Minister Koo Yun Cheol has suggested that, for the first time in 35 years, driving restrictions may be imposed on the public to restrict energy consumption. Civil servants are already subject to similar measures imposed towards the end of last week.
The damage to the country's current account surplus by the energy import bill is also being reflected in the fortunes of the Korean won (USDKRW). It has declined 3.5% versus the dollar in March.
However, it is in the volatile, frothy and speculative stock market, dominated by retail traders, where the most damage has been inflicted. Semiconductor giants, Samsung Electronics (KR:005930) and SK Hynix (KR:000660) account for almost 40% of the index but their fortunes have been badly dented by the advent of Google's $(GOOG)$ TurboQuant algorithm compression, a technology that can significantly reduce memory usage.
Moreover, fears of a shortage of helium have also raised alarm in the semiconductor industry. Helium plays an irreplaceable part in the manufacturing process for semiconductor chips and Qatar supplies a third of the global output. Spot helium prices have already risen 50% from levels seen in February.
Taken together, these news have prompted 14% corrections in the shares of SK Hynix and Samsung in March and both closed the month with big decline of 7.5% and 5% respectively.
Putting this into context, however, the KOSPI is still showing a 100% gain for the last twelve months and its 20% return for 2026 so far still ranks it first among major stock markets globally.
-Jules Rimmer
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 31, 2026 05:03 ET (09:03 GMT)
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