KOSPI plunges as much as 12% intraday… “Biggest drop, surpassing the 9/11 attacks”

KOSPI revives just before ‘5,000’ breaks

KOSDAQ briefly falls below 1,000

With signs that the Middle East crisis could escalate and drag on, South Korean stocks are in free fall. The KOSPI fell sharply, at one point posting an intraday decline of 12.65%, but recovered just before breaking below the 5,000 mark, paring some of its losses.

According to the Korea Exchange, as of 1:40 p.m. on the 4th, the KOSPI was down 600.86 points (10.37%) from the previous session to 5,191.05.

After opening at 5,592.59, down 3.44% from the prior day, the index steadily extended losses and at one point retreated to 5,059.45. It was at risk of breaking below the “5,000 KOSPI” level, but managed to trim losses somewhat.

As the rout persisted, both a sell-sidecar and a circuit breaker were triggered in the main board market during the session. A sell-sidecar, which halts the effectiveness of KOSPI futures program trading, was triggered again following the previous day shortly after the open. Even so, as the index failed to stem the slide and losses widened, a circuit breaker was activated at 11:19:12 a.m., halting trading on the main board market for 20 minutes.

In the main board market, foreign investors are net sellers of 945.6 billion won. Institutions and retail investors are net buyers of 771.1 billion won and 24.2 billion won, respectively.

All KOSPI market-cap heavyweights were in the red. Bellwethers Samsung Electronics and SK hynix were plunging 8.66% and 6.18%, respectively. Hyundai Motor was down 12.77%.

Amid worries of a broader Middle East conflict and a surge in international oil prices, only S-Oil was soaring, up 10.47%.

At the same time, the KOSDAQ was trading at 1,033.75, down 103.95 points (9.14%). It fell as low as 976.54, slipping below the “1,000 KOSDAQ” level.

A sell-sidecar was triggered on the KOSDAQ shortly after the open, at around 10:31:06 a.m. This was followed by a circuit breaker at 11:16:33 a.m., halting trading on the KOSDAQ market for 20 minutes.

Retail investors are net sellers of 1.0445 trillion won. Foreigners and institutions are net buyers of 581.3 billion won and 462.8 billion won, respectively.

As in the main board market, KOSDAQ heavyweights were also moving in negative territory across the board. Market leader EcoPro was down in the 14% range. Alteogen was also falling more than 10%.

Meanwhile, with stock indices plunging for a second straight day and roughly 1,000 points evaporating over the two-day span, investor sentiment appears deeply frozen. Still, brokerages advised investors to refrain from panic selling, saying the driving force behind the KOSPI rally has not been damaged.

Han Ji-young, a researcher at Kiwoom Securities, described it as an “indiscriminate and violent decline in stock prices,” adding, “The intraday drop of around 12% at one point even surpassed the decline during the 9/11 attacks (-12%). The very fact that a circuit breaker—rare in the history of the domestic market—was triggered is enough to fuel fear in the market.”

He said, “There is nothing newly added beyond existing negatives such as heightened war jitters between the U.S. and Iran and ongoing credit stress in the U.S. private markets,” and interpreted the move as follows: “Given how excessively and rapidly prices had surged, domestic stocks are falling particularly steeply. Foreign investors also appear to be prioritizing converting our market—high in liquidity and ease of cashing out—into cash for the time being.”

He added, “While we don’t know the exact point at which the KOSPI’s decline will end, or precisely when foreign selling will stop, at least for now it seems right to hold off on a ‘capitulation’ decision,” advising that “the earnings-improvement outlook, which is the engine of the KOSPI rally, has not been undermined.”

Shin Min-kyung, Hankyung.com reporter radio@hankyung.com