Korea's stock market opened lower as global asset prices plunged on concerns that the head of the U.S. Central Bank will be replaced by a hawkish figure favoring tightening. Worries that the ample liquidity environment that has supported global equities could change have dampened investor sentiment.
The stock market, which had surged recently, opened with a relatively large correction. However, as individual funds flowed into the main bourse and foreign funds into the KOSDAQ market early in the session, the losses narrowed.
On the 2nd, the KOSPI started trading at 5,122.62, down 101.74 points (1.95%) from the previous session. The index fell around 2% early on, but as individual funds flowed in, as of 9:20 a.m., the decline narrowed to around 1%.
The KOSDAQ also opened lower. It opened at 1,128.57, down 20.87 points (1.82%) from the previous session. Early-session losses widened to 2%–3% at one point. But as some of the top market-cap names swung to strong gains, the losses shrank sharply. As it turned slightly lower, it is attempting a rebound.
What provided the pretext for a correction in the market was news on the weekend that U.S. President Donald Trump had nominated former Governor Kevin Warsh as chair of the Federal Reserve (Fed). Seen as the likely next Fed chair, Kevin Warsh is regarded as a hawkish figure. As analysis emerged that the Fed is less likely to pursue further rate cuts, U.S. stocks fell and gold and silver prices plunged. The U.S. dollar, by contrast, strengthened.
Hwang San-hae, an analyst at LS Securities, said, "With Kevin Warsh nominated as the next Fed chair, price volatility across major asset classes has expanded," and noted, "In particular, we saw large-scale profit-taking centered on memory and artificial intelligence (AI) infrastructure-related sectors, which had been strong during the period of dollar weakness."
Early in the session on the main bourse, foreigners showed net selling close to 900 billion won, while individuals were net buyers of individual stocks and also net buyers of exchange-traded funds (ETF). In the KOSDAQ market, foreigners were net buyers of close to 100 billion won, reducing the index's decline.
As the dollar turned stronger, the won-dollar exchange rate jumped. The rate opened the day at 1,451 won, up 11.5 won.
Among top market-cap names on the main bourse, Samsung Electronics and SK hynix, which hit record highs last week, are falling, and SK Square is also declining sharply. Korea Zinc, which had been strong as commodity prices rose recently, is also plunging.
In the KOSDAQ market, buying funds are flowing into EcoPro and Rainbow Robotics.