On the 5th, following the KOSPI, the KOSDAQ index also plunged, triggering a temporary halt to program sell quotes (sidecar) in succession. It is the first time in 1 year and 3 months that sell sidecars for both the KOSPI and KOSDAQ have been triggered together since the "Black Monday" episode on Aug. 5 last year.
The Korea Exchange (KRX) triggered a sell sidecar on the KOSDAQ market at 10:26 a.m. that day. For the next five minutes, program-trading sell quotes were suspended and then automatically lifted five minutes later.
The exchange had also triggered a sell sidecar on the main board at 9:46 a.m. that day. This is about seven months since the buy sidecar in Apr.
A sidecar is triggered when KOSPI 200 futures rise or fall 5% or more from the previous closing price and the move lasts for one minute. For the KOSDAQ, it is triggered if KOSDAQ 150 futures fall 6% or more and the KOSDAQ 150 index falls 3% or more, with the move lasting for one minute.
The KOSPI opened at 4,055.47, down 1.61% from the previous trading day. Extending early losses, the KOSPI was down more than 6% at 3,870.89 as of 10:35 a.m. The KOSDAQ index was down 5.90% at 871.94 at the same time.
The market weakness is seen as reflecting the U.S. market's decline overnight, as overvaluation concerns grew around artificial intelligence (AI)-related sectors. As of 10:26 a.m. that day, program-trading transaction volume showed a net sell of 410.6 billion won.
Seo Sang-yeong, a researcher at Mirae Asset Securities, said, "After Palantir's earnings release the previous day, not only semiconductor stocks that had surged rapidly saw pressure from valuation concerns, but selling also poured into shipbuilding, defense, and automobiles, which are factors behind the (domestic market) decline."
Seo added, "We note that the desire to take profits is strengthening rather than a market collapse," and "again today, foreign investors' rotational trading behavior amid a weak won will determine the direction of the index."