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News Topical, Digital Desk : On February 2, 2026, the South Korean stock market experienced significant panic. The KOSPI index slipped below the crucial 5,100 level, forcing a circuit breaker to be implemented due to the sharp decline. The biggest pressure on the market was the news of Kevin Warsh's nomination for the position of Fed Chair in the US, which has led investors to fear a slowdown in interest rate cuts.
Lower circuit hit after heavy fall
On February 2, 2026, South Korea's benchmark index, the KOSPI, fell more than 4% during intraday trading. During trading, the KOSPI fell by approximately 4.31%, while by the close, it had fallen by approximately 1.95% to 5,169.36. The market witnessed such a severe sell-off that the index fell below 5,100, triggering a circuit breaker.
According to an official note, KOSPI 200 futures fell by approximately 5%, after which the sidecar mechanism was implemented. This meant that trading in the market was temporarily halted. This trading halt lasted for approximately 5 minutes. South Korea's two largest tech stocks led the decline. Shares of memory chip maker SK Hynix fell 6.66%, while the country's largest company, Samsung Electronics, fell 5.55%. Four major reasons clearly emerged behind this significant market decline.
The first reason is Warsh Shock.
The biggest shock for investors came regarding Kevin Warsh, a potential candidate for the position of Fed Chair in the US. The market sentiment strengthened that if a leader with a 'hawkish' stance like Kevin Warsh were to assume the major responsibility, the pace of interest rate cuts in the US could slow down. This directly impacted the dollar's strength and pressure on global equity markets. Investors fear that the Federal Reserve's stance may now be more stringent than before.
Second reason – Foreign Selling
Heavy selling by foreign investors in the South Korean market further exacerbated the decline. Foreign investors net sold approximately 549 billion Korean won (KRW). Specifically, Samsung Electronics saw losses of approximately 3% and SK Hynix, which fell approximately 4.73%.
Third reason – Global Risk-Off environment
Global markets were already in a risk-averse mood. On January 30th, gold fell by nearly 11% and silver by nearly 31%. The US tech index, the NASDAQ Composite, also slipped by 0.94%. These signs also increased anxiety in Asian markets.
Reason 4 – Fear of AI bubble
Tech and AI-based stocks had seen a strong rally over the past several months. Investors are now beginning to feel that this rally has been overdone. This is why profit-booking in tech stocks has intensified. Declines in major names like Samsung Electronics and SK Hynix dragged the entire index down.
This sudden sell-off in the market led to a decision to halt trading. Trading in the futures segment was halted for approximately five minutes under a sidecar mechanism to manage the sudden market imbalance.
Overall... The Korean stock market decline on February 2, 2026, wasn't limited to local factors alone. It reflected a combination of fears about US monetary policy, foreign investor withdrawals, a global risk-off environment, and growing concerns about an AI bubble in the tech sector. The biggest question for investors now is how much Fed signals and US rate expectations will determine the direction of Asian markets like the KOSPI in the coming days.
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