South Korean financial markets witnessed a dramatic fall on Monday. The benchmark KOSPI index tumbled to its lowest level in more than 17 months. Fears over U.S. tariffs, driven by President Donald Trump’s policy decisions, caused the steep sell-off. This downturn affected not just South Korea but rippled through stock markets across Asia.
KOSPI Triggers Emergency Trading Halt
The KOSPI dropped 113.43 points, or 4.60%, reaching 2,351.99 by 0239 GMT. At one point, it had fallen as much as 5.6%, the worst performance since November 1, 2023. As a result, South Korea’s stock exchange activated a sidecar trading curb. This mechanism temporarily halted algorithm-based program trading for five minutes. The last time this safety measure was triggered was on August 5, 2024, indicating the severity of the fall.
Asian Markets Mirror the Panic
Other Asian markets also faced heavy losses. MSCI’s index of Asia-Pacific shares, excluding Japan, dropped by over 3%. Markets in Hong Kong and Taiwan were hit hardest, each falling more than 9%. China’s stock indices sank over 5% in the same session. Japan’s Nikkei 225 dropped more than 6%, further deepening the regional crisis. Meanwhile, U.S. stock futures showed no signs of recovery after a two-day slump on Wall Street, adding more pressure.
Trump’s Tariffs Fuel Fears of Recession
Investors fear that President Trump’s trade strategy may push the global economy toward recession. The U.S. plans to implement a 25% tariff on South Korean imports starting Wednesday. These retaliatory measures, along with expected counteractions from other countries, have shaken confidence among international investors.
South Korea Announces Support Measures
To calm the situation, South Korea’s Finance Minister announced emergency plans. The government will offer financial support to industries that are facing immediate difficulties. The financial regulator also said it is prepared to activate a 100 trillion-won market stabilization fund to cushion the blow. Meanwhile, the Bank of Korea pledged to take steps to ensure market stability and prevent panic-driven crashes.
Analysts Expect High Volatility to Continue
Market analysts warned that the situation may remain unstable. Seo Sang-young, an analyst from Mirae Asset Securities, said, “Volatility will continue to remain elevated as Trump’s tariffs and retaliatory measures from other countries are adversely affecting corporate earnings.” Many fear that as global trade tensions rise, companies may struggle to maintain profits.
Major Corporations Suffer Sharp Losses
Several of South Korea’s biggest companies recorded large losses. Samsung Electronics, the country’s top chipmaker, dropped 4.28%, its sharpest decline in over four months. SK Hynix, another major tech firm, slid 7.19%, its worst performance in two months. Car manufacturers also suffered. Hyundai Motor lost 4.95%, its steepest fall since October 2023. Kia Corp fell 4.01%. Battery makers, steel producers, and pharmaceutical firms also posted significant declines.
Foreign Investors Sell Off Stocks
Foreign investors continued their selling spree for the seventh day in a row. On Monday alone, they sold off shares worth 1.17 trillion won. This constant outflow is adding more pressure on local markets and weakening investor morale.
Korean Currency Weakens
The Korean won also lost ground. It traded at 1,468.2 per U.S. dollar — down 0.5% from the previous close. This also marked a 2.6% drop from Friday, when the currency had touched a five-week high. That earlier rise came after a court ruling upheld President Yoon Suk Yeol’s impeachment, which briefly reduced political uncertainty.
Default Risk Surges as CDS Spreads Widen
South Korea’s credit risk sharply increased on Monday. The spread on five-year credit default swaps (CDS), which measure the cost of insuring against default, widened to 49.83 basis points. This was up from 40.84 on Friday — the biggest single-day jump since March 2020 and the highest level since January 2023. The jump shows investors are becoming increasingly worried about the country’s financial health.
Bond Yields Drop to Multi-Year Lows
As investors moved to safer assets, bond yields fell. The three-year Korean treasury bond yield dropped by 4.8 basis points to 2.426%, the lowest since March 2022. The 10-year yield also declined by 7.2 basis points to 2.668%, a level not seen since December 2024. Falling yields indicate that investors expect interest rates to stay low or drop further amid economic uncertainty.