The KOSPI index fell below 6,000 during trading, triggering a sell circuit breaker and increasing investor anxiety. What would have happened if stocks were purchased on a day when the sell circuit breaker was activated?
On October 13, the KOSPI closed at 6,035.35, down 348.89 points (5.46%) from the previous trading day. It dropped as low as 5,911.11 during the session, and at 9:47 a.m., a sell circuit breaker was activated, halting program sell orders for five minutes.
Looking at past instances, there have been cases where the index rebounded more than 5% the day after a sharp decline, while others saw further losses.
The most recent example occurred on August 19, when the KOSPI closed down 5.80% at 6,471.17. However, the following trading day, it surged 5.89% to 6,852.58, with a buy circuit breaker activated early in the session.
On August 5, 2024, the KOSPI plummeted 8.77% to 2,441.55 amid concerns over a U.S. recession. The next day, it rebounded 3.30%, and five trading days later, it rose to 2,618.30, reaching 2,681.00 twenty days later. If one had bought at the closing price on the activation day, they would have seen gains of 7.24% and 9.81%, respectively.
There were also instances of minimal rebounds. On April 7, 2025, the KOSPI closed at 2,328.20 after a sell circuit breaker was triggered by the shock of U.S. tariff announcements. The next day, it only rose 0.26% to 2,334.23.
Conversely, in March 2020, a starkly different outcome occurred. Amid fears of the COVID-19 pandemic, the KOSPI closed at 1,834.33 on March 12, when a sell circuit breaker was activated. The following day, it fell further to 1,771.44, a drop of 3.43%. By March 19, it had plummeted to 1,457.64. If one had purchased at the closing price on March 12, they would have faced an additional loss of 20.54% in just five trading days.
Among the four cases examined, three saw the KOSPI rise the next trading day, while one experienced a decline. However, these selected examples do not represent the overall probability of rebounds following sell circuit breaker activations.
* This article has been translated by AI.
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