The South Korean stock market nosedived on the first trading session after the Lunar New Year holiday Thursday, battered by concerns over the gloomy global economy and geopolitical risks stemmed from North Korea’s long-range rocket launch. 

The benchmark Korea Composite Stock Price Index dropped 56.25 points, or 2.93 percent, to close at 1,861.54.

In percentage terms, the plunge was the biggest single-day drop for Seoul stocks in nearly four years since May 2012.

The tech-heavy secondary bourse KOSDAQ also suffered the biggest daily fall in 32 months as it sank 33.62 points, or 4.93 percent to close at 647.69.

Investors sold off equities on escalating tension between the two Koreas as the Seoul government decided to shut down the inter-Korean industrial complex in Gaeseong on Wednesday in response to North Korea’s recent nuclear and missile tests.

The slide was further fueled by the global market turmoil led by a sharp fall in Japanese stocks which recorded 7.8 percent during the three-day New Year break.

“The Korean market is reflecting the extent of investor worries on negative external issues that occurred during the holiday and stagnant global stock markets,” said Kim Young-joon, an analyst at Kyobo Securities.

Other experts said that Korean stocks are expected to remain dull for a while but will rebound within a narrow range thanks in part to a possible delay in additional U.S. interest rate hikes.

On Wednesday, Federal Reserve Chair Janet Yellen said in her testimony to the Congress that this year’s global market turbulence may delay further monetary tightening in the United States.

“Taking the Korean market’s fundamentals and valuation into account, it is unlikely that KOSPI will skid under the 1,850-point range,” Lee Kyung-min, an analyst at Daishin Securities, said.

Most market heavyweights lost across the board, led by Internet portal operator Naver which lost 6.01 percent. LG Chem shed 4.98 percent while SK and Samsung C&T lost 4.87 and 3.62 percent, respectively.

Foreign investors offloaded a net 174.1 billion won ($145 million) and institutions bought a net 69.1 billion won. Retail investors scooped up a net 43.1 billion won.

The local currency ended at 1,202.5 won against the U.S. dollar, up from the previous trading of 1,197.4 won.

By Park Han-na (hnpark@heraldcorp.com)