The KOSPI market triggered 41 sidecars—temporary suspensions of program buy and sell orders—so far this year. This exceeds the 26 recorded annually during the 2008 global financial crisis, when sidecar activations were at their highest. As market volatility rose, the balance of credit loans, an indicator of leveraged investment known as "debt investing," fell to its lowest level in about three months.
According to the Korea Exchange on the 24th, the KOSPI market triggered a total of 41 sidecars from January 2 to July 24 this year, including 20 buy sidecars and 21 sell sidecars. Considering that only three sidecars were triggered throughout all of last year, market volatility-easing measures have surged sharply. Even in 2008, when the global financial crisis caused a major market shock, sidecar activations numbered 26. In about six months this year, the figure has already surpassed the annual total from a year marked by a global-scale economic crisis.
Circuit breakers, a stronger measure than sidecars, were triggered seven times in the KOSPI market during the same period. A circuit breaker is activated when the KOSPI index falls 8% or more from the previous trading day and sustains that level for one minute. When a circuit breaker is triggered, all stock trading on the KOSPI halts for 20 minutes. Since the system was first introduced in 2000, there have been 13 circuit breaker activations over about 26 years, with more than half concentrated in this year.
Sidecars and circuit breakers have traditionally been triggered by events with significant impact on the overall economy, such as financial crises or the COVID-19 pandemic. This year, however, the entire market has been rattled by relatively minor causes, such as fluctuations in the New York stock market overnight. Analysts say volatility has surged sharply as funds flooded into the domestic stock market amid its steep rally over the past year, combined with single-stock leverage products that amplify the price volatility of specific companies and the U.S.-Iran war.
As the market's swings widened, the debt investing indicator declined. According to the Korea Financial Investment Association, the balance of credit loans stood at 32.7492 trillion won on the 23rd, the lowest in about three months since April 9 (32.72 trillion won). The credit loan balance has been on a continuous downward trend since reaching a record high of 38.6328 trillion won on the 24th of last month. Brokerage receivables, a form of "ultra-short-term debt investing" involving two-day loans from securities firms, totaled 945.4 billion won as of the 23rd. This was the first time brokerage receivables fell below 1 trillion won since April 23 (966.6 billion won).
The KOSPI index again showed high volatility on this day. The KOSPI closed at 6,690.62, down 406.27 points, or 5.72%, from the previous trading day. It was the first decline in four trading sessions since the 20th. The previous day, the KOSPI surged 4% and recovered the 7,000 line on a closing basis for the first time in five trading days, but gave up the "7,000-point" mark again after just one day. The KOSPI opened down 1.35% at 7,000.78, then widened its losses and fell as low as 6,650.41 at one point. The KOSDAQ also ended down 5.32% at 748.22. Sell sidecars were triggered in both markets on this day.
Most major stocks by market capitalization plunged. Samsung Electronics (005930.KS) closed down 7.59% at 249,500 won, falling below the "250,000 won" mark. SK hynix (000660.KS) ended trading down 8.34% at 1.759 million won. This represents a steep decline considering that the stock changed hands at 2.987 million won intraday on June 25, about a month earlier. SK Square (-9.17%), Samsung Electro-Mechanics (-8.43%), and Hyundai Motor (-7.18%) also fell sharply, while in the KOSDAQ market, Rainbow Robotics (-17.62%) and Jusung Engineering (-13.97%) plunged.
