Kospi tanks below 5,000 on 'Black Monday'

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Kospi tanks below 5,000 on 'Black Monday'

Published: 02 Feb. 2026, 19:09 Updated: 02 Feb. 2026, 19:58

PARK EUN-JEE
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Audio report: written by reporters, read by AI

An electronic board shows the Kospi closing at 4,949.67, down 274.69 points, or 5.26 percent, at the Korea Exchange in Yeouido, Seoul, on Feb. 2. [YONHAP]

“Black Monday” gripped Korea as the main Kospi index crashed below the recently breached 5,000 mark and the won weakened sharply on Monday.

The plunge, which gave up much of this year’s world-beating gains, is attributed to bearish investor sentiment fearful of U.S. Federal Reserve chair nominee Kevin Warsh’s anticipated hawkish stance and skepticism surrounding the growth of big AI players like Microsoft in cloud computing.

The Kospi tumbled by 5.26 percent to close at 4,949.67, the biggest daily drop since Aug. 5, 2024, which triggered a cap to stem the sell-off. It dovetails with other major Asian indexes including Japan’s Nikkei 225, which lost 1.3 percent on Monday. Hong Kong's Hang Seng and Shanghai Composite indexes both dropped 2.5 percent.

At the heart of the high volatility is U.S. President Donald Trump’s pick for Fed chief.

"The nomination became a factor fueling market volatility largely because of perceptions that he is a hawkish figure,” said Jung Da-woon, an analyst at LS Securities.

"While details remain limited, a review of Warsh’s policy stance points to clear opposition to quantitative easing, support for quantitative tightening and a strong focus on guarding against inflation,” the analyst said.

An electronic board shows the Kospi closing at 4,949.67, down 274.69 points, or 5.26 percent, at the Korea Exchange in Yeouido, western Seoul, on Feb. 2. [NEWS1]

Foreign and institutional investors offloaded a net 2.5 trillion won ($1.7 billion) and 2.2 trillion won, respectively. Retail investors, however, went bargain hunting and snapped up a net 4.6 trillion won, a now-familiar pattern of moving in the opposite direction of foreign and institutional investors.

Another catalyst, analysts say, involves concerns over the potential growth of AI cloud computing, sparked by the disappointing performance of Microsoft's cloud business revealed during the latest earnings announcement last month. The segment is considered a benchmark for the prospects of the overall AI market and thus the profitability of Korean chipmakers, as it is heavily tied to OpenAI.

Market bellwether Samsung Electronics sank 6.29 percent and SK hynix was down 8.69 percent at close compared to the previous trading day.

"Semiconductors led the decline, with mounting concerns over AI profitability at Microsoft weighing heavily on the sector. The Philadelphia Semiconductor Index slid 3.87 percent,” said Lim Jung-eun, an analyst at KB Securities, adding that the latest steep gains in the Kospi also led to the short-term correction on Monday.

The analyst noted that a mixture of factors also contributed to the decline of the won, with Lim noting, “The Korean won also tumbled amid macroeconomic uncertainty."

The local currency weakened by 24.8 won to close at 1,464.3 won per dollar. The direction runs counter to what Korean policymakers wanted, with President Lee Jae Myung raising an alarm that the won's movements did not align with the country's economic fundamentals, a sentiment conveyed by U.S. Treasury Secretary Scott Bessent last month.

The chronically weak won received a rare breather after the United States and Japan hinted at a joint currency intervention to limit the fall of the yen, whose movement the Korean currency has mirrored.

The dollar-won exchange rate is expected to settle in the 1,430 to 1,470 won range, according to Lee Young-won, an analyst at Heungkuk Securities.

"While both the yen and the won strengthened last month amid speculation of potential intervention by the Federal Reserve, the broader trend in foreign exchange markets has not fundamentally changed," the analyst said, adding that "Concerns over Japan’s fiscal health and ongoing geopolitical risks remain intact, and some of the won's sharp appreciation last month could be partially reversed in the coming weeks."

BY PARK EUN-JEE [[email protected]]