KOSPI Plummets 5%, Triggering Sell Sidecar for 30th Time This Year

KOSPI plummeted at the start of trading on July 2, as seen on the display board at Hana Bank's dealing room in Jung-gu, Seoul. [Photo=Yonhap News]

KOSPI dropped more than 5% in early trading, prompting the activation of a sell sidecar in the securities market. This marks the 30th activation of the sell sidecar this year, surpassing the total number of activations during the entire year of the global financial crisis in 2008.
According to the Korea Exchange, the sell sidecar was triggered at 9:07 a.m. on July 2. This activation is the 30th of the year, with both sell and buy sidecars activated 15 times each.
The sidecar was triggered after the KOSPI 200 futures price fell from a reference price of 1,336.86 points to 1,255.94 points, a decline of 6.05%, sustained for over a minute. As a result, the effectiveness of program trading sell orders was suspended for five minutes from the activation time and was automatically released afterward. As of 9:07 a.m., the net selling volume from program trading reached 922.4 billion won.
The U.S. stock market's reaction to Meta's plans to enter the cloud business has raised concerns about a slowdown in AI investment cycles, which significantly impacted the domestic market. Fears that Meta's provision of surplus AI computing power to external clients could dampen future AI infrastructure investments and memory demand led to a more than 10% drop in semiconductor stocks like Micron and SanDisk in the U.S.
In South Korea, KOSPI opened at 7,933.10, down 370.31 points (4.46%) from the previous trading day, immediately losing the 8,000-point mark. Early in the session, Samsung Electronics and SK Hynix saw declines of over 6% and 7%, respectively, while other semiconductor-related stocks like SK Square and Samsung Electro-Mechanics also experienced significant losses.
The frequency of sidecar activations this year is unusually high. Since the sidecar system began operating in its current form in 2001, there were 26 activations during the entire year of the 2008 global financial crisis. This year, 30 activations have already occurred in just the first half of the year.
The sidecar is a market stabilization mechanism that suspends the effectiveness of program trading orders for five minutes when the KOSPI 200 futures price fluctuates by more than 5% from the reference price for over a minute. It can only be activated once per day and does not apply during the first five minutes of the regular market opening or within 40 minutes before market close.

* This article has been translated by AI.

RYU SO HYUN sohyun@ajunews.com