Seoul stocks tumbled more than 5 percent on Monday as global markets reeled from US President Donald Trump’s announcement of Kevin Warsh as the next Federal Reserve chair, dragging the benchmark Kospi back below the 5,000 mark.
The Kospi closed at 4,949.67, down 5.26 percent from the previous close, after sliding as low as 4,933.58 earlier in the session. The retreat pushed the index below 5,000 just one trading day after it surged past 5,300 for the first time Friday.
Amid the selloff, the exchange operator triggered a sidecar at 12:31 p.m., temporarily halting program sell orders for five minutes. A sidecar is activated when Kospi 200 futures swing by more than 5 percent for over a minute.
Korean equities largely tracked losses on Wall Street late last week, when the Nasdaq slid nearly 1 percent and the S&P 500 and Dow Jones Industrial Average each fell about 0.4 percent.
“Korean stocks are sliding as investors digest Kevin Warsh’s nomination as Federal Reserve chair and the renewed spike in market volatility,” said Lee Jae-won, an analyst at Shinhan Securities. “Focus on Warsh’s past criticism of quantitative easing has tempered expectations for aggressive interest-rate cuts.”
Trading volume on the Kospi surged as volatility intensified. Retail investors stepped in as buyers, posting net purchases of about 4.5 trillion won ($3.1 billion), while foreign investors and institutions remained heavy sellers, unloading a combined 4.2 trillion won worth of local shares.
Weakness was broad-based across sectors, with heavyweight stocks that had fueled the recent rally leading Monday’s selloff. SK hynix slid about 8.7 percent, while its largest shareholder SK Square sank over 11 percent. Market bellwether Samsung Electronics fell around 6.3 percent, and other top names including Hyundai Motor, LG Energy Solution and Hanwha Aerospace each lost more than 4 percent.
The tech-heavy Kosdaq also saw heightened volatility, briefly climbing above 1,150 to trade higher than its previous close before sliding more than 5 percent to as low as 1,089.89. The index later closed down 4.4 percent at 1,098.35.
Foreign investors remained net buyers in the secondary market, posting net purchases of about 410 billion won, while retail investors stepped in midday, buying roughly 210 billion won of shares.
Analysts warned that profit-taking could accelerate, as uncertainty surrounding US monetary leadership weighs on global assets. Gold and silver, typically viewed as safe havens, also sold off sharply following the nomination, with gold falling more than 10 percent and silver plunging about 30 percent in just a day.
“The Kospi and Kosdaq, which posted record monthly gains of around 24 percent, may enter a consolidation phase as US-driven uncertainties, including the Fed chair nomination and the slump in precious metals, weigh on sentiment,” said Han Ji-young, a researcher at Kiwoom Securities, adding that investors should brace for heightened volatility in the near term.
The local currency also weakened, with the won opening above the 1,450 level against the US dollar, before moving toward 1,465 near the session’s close.
jwc@heraldcorp.com
