KOSPI Dips Below 5,100 Early, Recovers Some Losses to Trade Around 5,170

KOSPI Opens Down 1.95%
KOSDAQ Starts Down 1.82%

The KOSPI and KOSDAQ both opened lower on February 2, amid heightened external volatility. Fierce strategic maneuvering is underway regarding the policy stance of the next U.S. Federal Reserve (Fed) chair candidate.

As of 9:15 a.m. on this day, the KOSPI index was trading at 5,170.97, down 53.39 points (1.02%) from the previous trading day. The KOSPI opened sharply lower at 5,122.62, down 101.70 points (1.95%), plunged to as low as 5,083.51 early in the session, and has since recovered part of its losses. Foreign investors are net sellers of 865.4 billion won. Individual investors are net buyers of 743.8 billion won, while institutional investors are net buyers of 90.5 billion won.

On the 2nd, as the KOSPI started lower and broke below the 5100 level early in the session, the KOSPI and KOSDAQ indices were displayed on the status board in the dealing room of Hana Bank in Jung-gu, Seoul. Photo by Yonhap News

By sector, textiles & apparel (0.75%), electricity & gas (0.34%), transportation equipment & parts (0.30%), chemicals (0.27%), and food, beverages & tobacco (0.19%) showed modest gains. In contrast, metals (-4.09%), electrical & electronics (-2.05%), medical precision instruments (-1.79%), securities (-1.76%), entertainment & culture (-1.52%), manufacturing (-1.47%), machinery & equipment (-1.21%), and IT services (-1.17%) were weak.

Among large-cap stocks, Hanwha Aerospace (3.00%), KB Financial Group (2.74%), Shinhan Financial Group (1.78%), Hanwha Ocean (1.66%), and Kia (1.64%) rose. On the other hand, SK Square (-4.91%), SK Hynix (-3.52%), Samsung Electronics Preferred (-2.56%), Samsung Electronics (-1.50%), Samsung Life Insurance (-1.33%), Doosan Enerbility (-1.21%), and Hyundai Motor (-1.20%) declined.

Previously, on January 30 (local time), U.S. President Donald Trump nominated former Fed Governor Kevin Warsh as the 17th chair of the Federal Reserve. The global asset markets have been shaken by expectations that Warsh, considered a "hawkish dove," could simultaneously cut interest rates and tighten liquidity. Precious metals and virtual asset prices plunged, while the value of the dollar rose.

At the same time, the KOSDAQ index was at 1,148.02, down 1.42 points (0.12%) from the previous session. The KOSDAQ opened at 1,128.57, down 20.87 points (1.82%), but has since trimmed its losses. Foreign investors are net buyers of 107.2 billion won, and individual investors are net buyers of 30.2 billion won. Institutional investors are net sellers of 65.7 billion won.

Among KOSDAQ large-cap stocks, Ecopro (4.92%), Rainbow Robotics (2.88%), ABL Bio (1.92%), Peptron (1.47%), HLB (1.62%), Robotis (1.62%), and Classys (1.08%) were strong. In contrast, Caregen (-14.02%), Mezzion (-6.15%), Lino Corporation (-5.67%), Wonik IPS (-4.72%), Pharmaresearch (-3.27%), Alteogen (-2.91%), Voronoi (-2.01%), Kolon TissueGene (-1.90%), and EO Technics (-1.73%) declined.

Experts say that if Warsh is appointed as the Fed chair, there is a possibility of a short-term rate cut, but in the mid- to long-term, he is expected to maintain the Fed's independence and pursue credible monetary policy.

Lee Kyungmin, a researcher at Daishin Securities, said, "The nomination of former Governor Warsh, who is regarded as a hawkish figure, is fueling liquidity concerns. For the time being, it will be necessary to consider increased volatility in asset and financial markets that have surged recently," adding, "If, during the process of cooling off short-term overheating and relieving upward fatigue, the Fed secures its independence and Warsh's more dovish stance compared to the past becomes exposed and absorbed by the market, volatility is also expected to gradually subside."

Han Jiyeong, a researcher at Kiwoom Securities, commented, "Although heightened volatility is expected, the price fluctuations triggered by the nomination of the next Fed chair itself will likely be short-lived," adding, "Rather than focusing on this, it would be more appropriate to respond to the market based on major U.S. economic indicators such as the earnings of leading stocks scheduled for this week and the January nonfarm payrolls, which are free from the impact of the government shutdown."