On September 3, the KOSPI and KOSDAQ markets experienced a sudden drop of approximately 4 percentage points within just 10 minutes, despite no clear negative news driving the decline. This unexpected event raised questions among investors about the cause of the sharp downturn.
According to the Korea Exchange, the KOSPI closed at 6,579.48 points, up 16.76 points (0.26%) from the previous trading day. The index started the day at 6,650.33 points, reflecting an increase of 87.61 points (1.33%), and maintained a rise of over 1% until around lunchtime. The market's initial rally was attributed to a rebound in the New York stock market, aided by a drop in the U.S. 10-year Treasury yield to around 4.7%, which boosted semiconductor stocks like Dell (up 15.81%) and NVIDIA (up 3.21%).
However, the market sentiment shifted dramatically around 2 p.m. The KOSPI, which had reached 6,659 points at 1:50 p.m., began to reverse course at approximately 2:14 p.m. By 2:25 p.m., the index had plummeted to 6,439 points, marking a decline of 220 points (4% from the intraday high) in just 10 minutes.
The KOSDAQ also mirrored this sudden drop, falling from over 800 points to 782 points by 2:27 p.m.
The abrupt decline appears to have been primarily driven by selling from foreign and institutional investors. At around 2:16 p.m., foreign and institutional investors sold a net 386 billion won and 118.3 billion won, respectively. Notably, institutions had been net buyers of 16.8 billion won until 2 p.m. but sold off 467.8 billion won in the following 30 minutes.
Market analysts are divided on the interpretation of this sudden drop, especially given the absence of a single triggering negative factor. Lee Kyung-min, a researcher at Daishin Securities, noted, "Despite favorable external conditions with falling oil prices and Treasury yields, the domestic market experienced a sharp correction around 2 p.m., followed by a partial recovery of losses. The lack of clear negative news suggests that increased selling by financial investors and pension funds contributed to the intraday volatility."
Concerns over escalating tensions in the Middle East have also been cited as a factor prompting risk-averse behavior among investors. Reports of additional attacks by Iran on U.S. military-related targets in Kuwait have heightened the preference for safe-haven assets. Seo Sang-young, a researcher at Mirae Asset Securities, stated, "As fears of escalation in the Middle East resurfaced, profit-taking in the stock market increased. With trading volumes declining, volatility has intensified, leading to rapid declines and rebounds in response to minor issues, indicating a fundamentally weak market condition."
* This article has been translated by AI.
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