What a difference a day makes to market confidence.
On Tuesday, investors were unnerved by North Korea's attack on a South Korean island, sparking a panic sell-off. But just 24 hours later, the same investors were looking to snap up bargains as the Seoul market recovered.
"If you look back at the last five years when we've had scares, they were all seen as buying opportunities," said Todd Martin, an Asia equity strategist with Societe Generale in Hong Kong.
The South Korean currency also staged a recovery yesterday. The won clawed back some of its early losses and was down about 0.5 per cent after shedding 3 per cent against the dollar on Tuesday.
Major markets in South Korea and Japan were lower, reflecting lingering unease after the Tuesday attacks, which were the fiercest since the Korean War ended in an uneasy truce in 1953.
But attractive valuations for Korean shares, its highly competitive industries and the country's current account surplus still remained draws for foreign and domestic investors, who recalled past clashes with the North were short-lived.
"The rule among hedge funds and long-only funds is that you let the market sell off and watch for your entry point to get involved," Mr Martin said.
December KOSPI stock index futures were up 1.7 per cent yesterday after dropping 2.4 per cent on Tuesday, the biggest single-day decline since late May, while the main Seoul market closed 0.2 per cent lower.
Turnover in the main KOSPI stock market was 8 trillion won (Dh25.83 billion), higher than the daily average last month of 6.5tn won.
"Heightening geopolitical risks are pressuring the share market but overall, market reaction is fairly calm and we are actually seeing foreign investors and pension funds picking up shares, searching for bargains," said Kwak Joong-bo, a market analyst at Samsung Securities in Seoul.
Even before the shelling, Korean equity valuations were lower than other Asian markets partly because of the simmering tension between the North, with its nuclear ambitions, and the South.
Before Tuesday's trouble, foreign investors had been slowing their buying of Korean stocks, shifting to other markets. Foreign inflows to Korea's equity market are up 27 per cent from last year but smaller than the inflows to Japan, Indonesia, India and Thailand, TrimTabs Investment Research reported.
"We think the provocations by the North are one-offs whose financial market impact will be transitory, not stepping stones to a financial Armageddon," said Prakash Sakpal, an economist with ING in Singapore.
The Nikkei fell more than 2 per cent from Monday's close early in the session but trimmed its losses to end the day down 0.8 per cent at 10,030.11. The broader Topix index shed 1 per cent to 866.57.
"I believe Tokyo participants have reacted pretty calmly to the Korean turmoil, which resulted in limited falls in Japanese shares today," Shoji Yoshigoe, a senior strategist at Mitsubishi UFJ Morgan Stanley Securities, said yesterday.
"The fact that falls in South Korean shares were limited was also positive for Japanese stocks."
In a twist to the Korean attack, the Tokyo markets were closed for a national holiday on Tuesday when other major indexes fell as investors looked for safe havens in the US dollar, gold and government bonds after the exchange of fire.
Yesterday, Asian shares were mixed, with Hong Kong and Shanghai shares edging higher.
"Investors wanted to book profits after the recent rally," said Fumiyuki Takahashi, an equity strategist for Barclays Capital Japan.
"But this drop in the Nikkei, provided there is no further friction on the Korean peninsula, will only be temporary because the dollar-yen rate is steady above ¥83 and earnings of Japanese companies were better than the market expected."
Many Tokyo traders said they believed the Nikkei still had plenty of room to rise.
"The basic bullish trend towards Japanese shares has not changed. The Nikkei still can go up by around 500 to 1,000 points from the current level by the end of the year," said Shoji Hirakawa, the chief equities strategist at UBS Securities Japan.
In Hong Kong, the Hang Seng Index edged higher by 0.9 per cent to 23,102.50 after tumbling 2.7 per cent on Tuesday, the biggest drop since May 25.
"After yesterday's panic selling, some people are covering some of their short positions," said Steven Leung, the director of institutional sales at UOB-Kay Hian. "China tightening concerns have more or less been priced in."
* with Reuters and Bloomberg