[Weekly Market Review] KOSPI 1700 and KOSDAQ 500 Collapse...Historic Plunge

Global Fear of COVID-19 Sweeps the World... KOSPI Drops 500P in a Week
Sidecar and Circuit Breaker Triggered Simultaneously for the First Time in 8 Years

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] An unprecedented market crash unfolded. As the global stock markets were shaken by the spread of the novel coronavirus disease (COVID-19) and the sharp drop in international oil prices, fear spread domestically as well. The KOSPI index fell to the 1600 level for the first time in nine years, and the KOSDAQ index dropped to the 487 level, a seven-year low.

According to the Korea Exchange on the 14th, at 10:43 a.m. on the 13th, the KOSPI fell 8.14% from the previous day to 1684.93. Compared to the opening day on the 9th when it rose to 1989.50, it dropped more than 500 points in just five days. This was a clear indicator that the market was engulfed by the fear of a crash.

The market, which had maintained the 1900 level until the 10th, began to decline from the 11th. This was due to the surge in confirmed COVID-19 cases and deaths in Europe and the Americas, spreading the perception that Western societies were also unsafe. When the World Health Organization (WHO) declared COVID-19 a pandemic on the 11th (local time), fear intensified further and the market crash began. The 1900 level was broken for the first time since August last year.

From the 12th, the plunge accelerated, with the index falling as low as 1808.56 during the day. The Korea Exchange triggered a sidecar at around 1:10 p.m. in the securities market. This measure suspends program trading orders in the stock market for five minutes if futures prices fluctuate by more than 5% compared to the previous day's closing price for one minute. The last time a sidecar was triggered was on October 4, 2011, amid concerns over Greece's debt default, about eight years and five months ago.

The 13th saw the peak of the decline. Not only the 1800 level but even the 1700 level collapsed in a single day, plunging to 1684.93. Falling below the 1680 level was the first time in nine years since October 2011. The Korea Exchange again triggered a sidecar to temporarily suspend program sell orders, following the previous day. This was because the KOSPI 200 futures price fell more than 5% from the previous day's closing price and sustained for one minute. Triggering sidecars two days in a row was the first time in eight years and seven months since August 8-9, 2011.

The KOSDAQ was also engulfed in panic that day. At 9:04:01 a.m., a Level 1 circuit breaker was triggered, temporarily halting trading. This was the first time a circuit breaker was triggered in the KOSDAQ market since February 12, 2016, over four years ago. This occurred because the KOSDAQ index fell more than 8% from the previous day's closing price and sustained for one minute. At 9:38 a.m., a sidecar was also triggered due to a sharp drop in KOSDAQ 150 futures prices and the spot index (KOSDAQ 150). At the time of activation, KOSDAQ 150 futures had fallen 6.47% and the spot index 7.33% compared to the previous day. Despite this, the downward trend continued. At 11:08 a.m., the index fell to 487.07, down 13.56% from the previous day. Falling to the 487 level was the first time in seven years since December 2013.

In the afternoon, both KOSPI and KOSDAQ showed slight recovery. Around 2 p.m., the KOSPI recovered to the 1800 level before closing at 1771.44. The KOSDAQ also rose to 540.17 around 2 p.m. before closing at 524.00.

Meanwhile, in the securities market this week, foreigners net sold 6.209 trillion won. In contrast, individuals and institutions net bought 4.1115 trillion won and 1.5264 trillion won, respectively. In the KOSDAQ market, individuals net sold 287.9 billion won, while foreigners and institutions net bought 134.5 billion won and 164.5 billion won, respectively.

This content was produced with the assistance of AI translation services.