KOSPI dips below 5,000 intraday on “Warsh shock”…sell-sidecar triggered [Roundup]

Trump taps hawkish Warsh as next Fed chair

Rate-cut hopes fade…global asset markets rattled

Exchange triggers KOSPI sell-sidecar

KOSDAQ also plunges more than 5% intraday

The KOSPI fell back below the 5,000 mark intraday on the 2nd. The move is seen as reflecting diminished expectations for monetary easing after Kevin Warsh, a former Fed governor viewed as relatively “hawkish” (favoring monetary tightening), was nominated as the next chair of the U.S. Federal Reserve.

As of 1:05 p.m., the KOSPI was down 289.07 points, or 5.53%, from the previous session to 4,935.29. As the benchmark tumbled, a program-trading curb (sidecar) was triggered.

The Korea Exchange suspended the effectiveness of program sell orders in the main board market for five minutes at around 12:31:12 p.m. after a drop in KOSPI 200 futures prices.

A KOSPI sidecar is triggered when the price of the most actively traded contract by volume among KOSPI 200 futures rises or falls by at least 5% and stays there for one minute.

Earlier, U.S. President Donald Trump on the 30th (local time) nominated Warsh, regarded as a hawkish figure, as a candidate for the next Fed chair.

After Trump named Warsh as a candidate for Fed chair, global asset markets sank across the board over the weekend. On the 30th (local time), the Nasdaq Composite fell 0.94%, while the S&P 500 and the Dow Jones Industrial Average also declined 0.43% and 0.36%, respectively.

Gold and silver, often considered relatively safe-haven assets, also slid. On the same day on the New York Mercantile Exchange, international gold prices plunged 11.38% in a single day, while silver prices cratered 31.37%. Bitcoin also fell to around the $70,000 level for the first time in nine months.

This is interpreted as reflecting concerns that Warsh’s nomination could weaken expectations for rate cuts, potentially draining liquidity from asset markets.

At this time, foreign investors are dumping KRW 3.0970 trillion worth of shares in the KOSPI cash market and KRW 2.1170 trillion worth in the KOSPI 200 futures market. Institutions are also net sellers by KRW 1.6750 trillion. Retail investors alone are net buyers by KRW 4.6000 trillion.

Large-cap KOSPI names are falling across the board. Samsung Electronics (-5.92%), SK Hynix (-7.98%), Hyundai Motor (-5.2%), LG Energy Solution (-4.52%), and Samsung Biologics (-2.01%) are all lower.

The KOSDAQ is also sliding by more than 5%. At this time, the KOSDAQ was down 5.1% from the previous session to 1,090.78.

The won-dollar exchange rate is surging by more than KRW 15 intraday. At this time, the won-dollar rate was up KRW 15.8 from the previous session at KRW 1,459.4.

Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com