Korea Stock Market Sideways as Sidecars Trigger Nearly Daily Since July 15

The Kospi, which had attempted a rebound the previous day by topping the 7,000 mark, collapsed to the 6,600 level in a single day. The market has been hit by sidecar triggers (buy and sell) nearly every day since the 15th of this month, with only one exception, and the extreme volatility that followed the May 27 launch of single-stock leverage exchange-traded funds (ETFs) for Samsung Electronics and SK hynix shows no signs of easing.

According to the Korea Exchange on the 24th, the Kospi closed at 6,690.62, down 406.27 points (-5.72%) from the previous session. The Kosdaq also finished at 748.22, down 42.06 points (-5.32%). Samsung Electronics (005930) fell 7.59% and SK hynix (000660) dropped 8.34%, while Hyundai Motor (-7.18%) and Kia (-12.88%) also plunged on disappointing earnings. Sell sidecars were triggered in both markets on the day.

The Kospi has seen sidecars triggered on 41 of a total 137 trading days (30%) this year, with the frequency rising to 10 times in June and 12 times in July. This week alone, they occurred on four of five trading days—sell on the 20th, buy on the 21st, buy on the 22nd and sell on the 24th. The fact that sidecars appeared on 23 of 41 trading days (56%) since May 27 underscores just how severe the swings have been.

The day's plunge is seen as the result of a combination of domestic and external negative factors. On the supply-demand front, a change of heart among foreign investors amplified the decline. Foreigners had scooped up 5.571 trillion won over the previous four trading days, but sold off 3.2709 trillion won on the day. In contrast, retail investors, who had been offloading shares to foreigners over those four days, bought 5.1795 trillion won on the day.

The macro environment also weighed on sentiment. Renewed tensions over Hormuz pushed Brent crude past $100, while the yield on 10-year U.S. Treasuries topped 4.7%. On top of this, rumors during the session that Morgan Stanley had taken a negative view on Chinese memory inventories and demand accelerated the sell-off in semiconductor leaders.

As the correction dragged on, the balance of credit loans—an indicator of "leveraged investment"—fell to 32.7492 trillion won on the 23rd, the lowest level in about three months. It was the lowest since April 9 (32.72 trillion won). Investor deposits stood at 104.2974 trillion won, teetering near the 100 trillion won mark.

Experts say investors should closely watch progress in U.S.-Iran negotiations over the weekend and the direction of oil prices. Kim Sung-geun, a researcher at Mirae Asset Securities, said, "Military conflict is expected to continue for the time being, heightening caution over oil prices and inflation," adding, "A conservative approach to the market is needed until signs of negotiations emerge, while keeping an eye on whether Israel enters the war, oil prices and interest rates."