The KOSPI index fell sharply again, prompting the activation of a market stabilization mechanism known as a 'sidecar.' This year, the market has experienced repeated surges and declines, making the sidecar a common occurrence.
On the morning of August 19, the Korea Exchange activated a sell sidecar after KOSPI 200 futures plummeted. The KOSPI dropped by 5 to 6 percent at the start of trading. The sidecar mechanism halts the effectiveness of program trading bids for five minutes if the KOSPI 200 futures price fluctuates by more than 5 percent from the reference price for over one minute.
The decline was influenced by negative news from the U.S. Overnight, Nvidia fell by 2.34 percent, Micron dropped by 7.02 percent, and the Philadelphia Semiconductor Index plummeted by 4.98 percent. Additionally, SK Hynix's American Depositary Receipts (ADRs) fell by 9.20 percent. The yield on the U.S. 30-year Treasury bond rose to 5.33 percent during trading, marking the highest level since 2007, which dampened investor sentiment.
This year, the sidecar has been activated unusually frequently. As of August 12, the KOSPI market had seen 47 sidecar activations, with 24 sell sidecars and 23 buy sidecars. The activation of a sell sidecar on the 19th increased this total further.
This figure has already surpassed the record set during the global financial crisis. Since tracking began in 2002, the previous annual high was 26 activations in 2008. This year, the 27th sidecar was triggered on June 23, exceeding the financial crisis record before the halfway point of the year.
There have also been instances of significant gains. On August 12, the KOSPI rose by over 4 percent, triggering the 23rd buy sidecar of the year. A week earlier, on August 6, the index fell sharply, leading to the 24th sell sidecar activation.
Market analysts attribute the high volatility of the KOSPI this year to the concentration of large-cap semiconductor stocks and external factors. With Samsung Electronics and SK Hynix holding significant weight in the index, changes in the supply and demand of these stocks quickly influence the overall KOSPI movement. Geopolitical uncertainties surrounding the U.S. and Iran, along with fluctuations in oil prices and interest rates, have repeatedly shaken the stock market this year.
Indeed, on August 18, the KOSPI rose by as much as 3.42 percent before reversing course and ultimately closing down 1.55 percent at 6,869.83. The index has been experiencing a rollercoaster pattern, with significant reversals occurring within a single day.
* This article has been translated by AI.
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