Kospi Takes a Dive: South Korean Benchmark Falls 7.5%, Activating ‘Sidecar’ Mechanism for Investors
South Korea’s stock market faced a significant downturn on Thursday, with the benchmark Kospi dropping 7.49% amid heavy selling in technology stocks. This decline triggered a five-minute trading halt on program sell orders after a sharp fall in index futures. The Kospi fell 450.02 points to 5,558.79, marking its longest losing streak since September 2024 and a nearly 35% drop from its record high in June.
The sell-off in Asian equities followed a technology-led decline on Wall Street, where US consumer price inflation exceeded expectations in September. This data raised concerns about potential interest rate hikes by the Federal Reserve, further pressuring technology and AI-related stocks. The MSCI Asia-Pacific index outside Japan fell 3.3%, while Japan’s Nikkei 225 declined by 4.8%. S&P 500 e-mini futures were down 0.5%.
Samsung, SK Hynix Lead South Korean Market Rout
Major technology firms in South Korea experienced some of the steepest losses. Samsung Electronics shares fell 9.05%, and SK Hynix dropped 11.06%, reflecting broader weaknesses in Asia’s semiconductor supply chain. Other notable declines included LG Energy Solution, which lost 3.44%, and Hyundai Motor, down 3.99%. Kia Corp also fell by 2.03%.
The negative trend extended to other Asian technology companies, with Taiwan Semiconductor Manufacturing Company (TSMC) down 2% and Japan’s Kioxia Holdings plunging over 11%. SoftBank Group, an investor in AI, saw a decline of 9.4%. Market breadth in South Korea was heavily negative, with 768 of the 889 stocks traded declining, while foreign investors sold shares worth a net 355.6 billion won. The South Korean won strengthened 0.21% to 1,339.5 per dollar.
‘Sidecar’ Triggered
The sharp market decline prompted the South Korean exchange operator to activate a sell-side “sidecar,” an automatic mechanism designed to cool trading during heavy selling. This measure suspends program sell orders for five minutes following steep losses in index futures. The KOSPI’s decline extended to seven consecutive sessions, with the index shedding nearly 35% since its June record. Retail investors were particularly affected during a sell-off in July, when the index fell around 20%. Losses in highly leveraged single-stock exchange-traded funds (ETFs) contributed to the damage during that period.
The sell-off in Asia followed Wall Street’s third consecutive session of losses, with the S&P 500 declining 1.1% and the Nasdaq Composite falling 1.9%. A gauge of semiconductor stocks recorded its sixth straight day of losses as investors reassessed the outlook for companies sensitive to borrowing costs. In South Korea’s bond market, December futures on three-year treasury bonds rose 0.12 points to 103.00, while the yield on the most liquid three-year Korean treasury bond fell 3 basis points to 3.855%. The benchmark 10-year yield declined 2.1 basis points to 4.224%. Oil prices also fell, with Brent crude down 1.7% to $104.20 a barrel.
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