Kospi posts record daily drop on foreign sell-off

Sidecars and circuit breakers kicked in during trading on Monday as the main bourse closed down a record 234.65 points at 2,441.55 on fears of a U.S. recession.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 2,441.55 points on Monday, down 8.77 percent, or 234.64 points, from the previous trading session. [AP/YONHAP]

Korea's main stock index tanked at a historic pace on Monday due to a massive selling spree by foreigners, triggering trading curbs for the first time in more than four years.

The record plunge came as stock exchanges across the Asian region went through a steep decline during the day, driven by growing fears of a recession in the United States and expectation-missing quarterly earnings from Big Tech companies.

The benchmark Kospi shed a whopping 234.64 points, or 8.77 percent, from the previous trading day to close at 2,441.55 points on Monday. It marked a seven-month low since January 18, when it closed at 2,440.04 points, and the first time since February 1 for the main index to trade below the 2,500 threshold.

It was the worst session ever recorded in terms of the point loss.

The 234.65-point plunge was the biggest ever recorded in Korea, breaking the previous record of a 133.56-point decline logged on March 19, 2020, by a significant margin.

The Kospi plummeted to as low as 2,386.96 points at 2:53 p.m. despite a trading curb, which broke the previous mid-trading record of a 184.77-point drop logged in August of 2011.

It is also the first time ever for the Kospi to sink by more than 100 points for two consecutive trading days, as the index fell 101.49 points, or 3.65 percent, to close at 2,676.19 points on Friday.

Trading volume was heavy at 18.4 trillion won ($13.5 billion), with foreign investors net-shedding shares worth 1.53 trillion won in a massive selling spree. Institutional investors sold a net of 269.3 billion won, while retail investors picked up 1.7 trillion won.

The secondary Kosdaq market also lost 88.05 points, or 11.3 percent, to close at 691.28 on Monday.

Over 1,300 out of 2,699 companies trading on Korean stock markets dipped to a new 52-week low.

Market heavyweights tumbled significantly, with Samsung Electronics slipping 10.3 percent to 71,400 won, the biggest plunge since the global financial crisis in 2008.

SK hynix lost 9.87 percent to hit 156,100 won, and Hyundai Motor slipped 8.2 percent to 224,000 won.

The steep falls triggered trading curbs for both the Kopsi and Kosdaq bourses.

The Korea Exchange activated circuit breakers for the Kospi market at 2:14 p.m., when the index was trading at 2,459.22, down 216.97 points or 8.1 percent, and for the Kosdaq market at 1:56 p.m., when the junior index was trading at 716.53 points, down 62.8 points or 8.05 percent.

It marked the first time since March 19, 2020 — and the sixth time ever — that a circuit breaker has been activated on the Kospi market. A sidecar was activated earlier that day at 11 a.m., halting program trading of Kospi 200 futures for five minutes.

Sidecars and circuit breakers are mechanisms designed to ease volatility in stock markets. A sidecar suspends futures trading for five minutes to stop a panic. It is triggered when Kospi 200 futures rise or fall more than 5 percent and hold there for at least one minute.

A circuit breaker suspends all trades, encompassing not only futures but also all spot trading and related derivatives. Three circuit breakers are possible: when an index falls 8 percent, 15 percent or 20 percent compared to the previous day’s close.

The stock market nosedive occurred across Asia on Monday, with Japan’s Nikkei Stock Average losing a whopping 12.4 percent and Taiwan’s benchmark index also sliding by more than 8 percent.

U.S. data indicating a contraction in manufacturing and employment fueled worries over a possible slowdown in the U.S. economy, leading to the massive outflow of foreign investors from the Asian stock markets.

“The possibility of a U.S. economic recession still remains low, yet fears of a potential slowdown are likely to persist for a while,” noted Samsung Securities analyst Yoo Seung-min, also citing growing geopolitical tensions in the Middle East and uncertainties stemming from the U.S. presidential election as drivers of the heightened market volatility.

Financial authorities held an emergency meeting on Monday afternoon, chaired by Financial Services Commission Chairman Kim Byoung-hwan, with Financial Supervisory Service Gov. Lee Bok-hyun in attendance.

"The scope of the stock market decline was excessive compared to the actual economic and financial situations of Korea," said Kim, calling for "calm and reasonable decision making by market players."

Earlier in the day, the Ministry of Economy and Finance also held a conference call with the Bank of Korea and financial authorities. Finance Minister Choi Sang-mok called for a bolstered around-the-clock monitoring of the stock market situation.

The local currency fell in value against the greenback, trading at 1,374.8 won per dollar as of 3:30 p.m., up 3.6 won from the previous session. The won sharply depreciated against the stronger Japanese currency, rising 44.67 won to trade at 964.60 won per 100 yen.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]