By Jihoon Lee

SEOUL (Reuters) -South Korean shares fell for a second straight session on Monday, with trading curbs activated for the first time in four years, as risk appetite dampened across global financial markets on U.S. recession fears.

The benchmark KOSPI fell as much as 8.1% in afternoon trade, after dropping 3.7% on Friday, and was set to post its worst session since March 2020.

The fall triggered trading curbs of sidecar and circuit breakers on the KOSPI for the first time since 2020. They were also activated on the junior KOSDAQ index.

A sidecar is activated when index futures fall or rise sharply and halts programme trading for five minutes to curb steep price movements. Circuit breakers, which halt all trading of stocks and derivatives for 20 minutes, are activated when indexes fall or rise more than 8%.

In the broader Asian market, the MSCI Asia Pacific ex-Japan Index fell more than 2%, while Japan’s Nikkei dropped 10%.

Chip heavyweights Samsung Electronics and SK Hynix lost more than 9%, tracking steep declines in the Philadelphia Semiconductor Index, which had driven Wall Street’s rally on optimism around artificial intelligence.

The KOSPI was down 14% from a six-month peak of 2,860.42 hit in July.

“The market has entered territory of extreme fear amid a slump in U.S. big tech stocks, worries about a slowing U.S. economy and sharp declines in Asian markets,” said Kim Dae-jun, analyst, Korea Investment Securities.

Earlier in the day, South Korean authorities issued several comments to calm investor sentiment, with the finance minister vowing to respond to heightened market volatility according to a contingency plan.

The U.S. stock futures fell more than 1% in Asian trading hours on Monday, after a heavy sell-off last Friday that confirmed the Nasdaq was in correction territory.

The U.S. unemployment rate jumped to near a three-year high, data showed on Friday, heightening fears the labour market was deteriorating and potentially making the economy vulnerable to recession.

The South Korean won weakened on Monday, after hitting a more than two-month high of 1,356.0 per dollar on Friday, as foreigners sold local stocks worth more than 1.3 trillion won ($958.41 million).

($1 = 1,356.4200 won)

(Reporting by Jihoon Lee; Editing by Rashmi Aich and Mrigank Dhaniwala)

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