On the 4th, the KOSPI index, which had plunged 12%, soared nearly 10% the next day, staging an unprecedented "V-shaped rebound." Considering that in past crashes the recovery typically reached around half the decline, the surge is unusual. Analysts said volatility widened amid a liquidity-driven market and a short-term spike, with strong pressure for a snapback.
According to Korea Exchange (KRX), the KOSPI index finished at 5,583.90, up 490 points (9.63%) from the previous day. Just one day after suffering the ignominy of the "biggest drop on record" since the index launched in 1980 with a 12.06% plunge the day before, it posted a record-setting fire column.
What the market is watching in this rebound is the strength and speed of the recovery. An analysis of three major externally driven plunges from 2023 to 2026 found that over the two trading days after a crash, the index typically recovered about 50% of the drop. This time, however, in just one day it recouped more than about 80% of what it lost yesterday, showing a deeper and steeper recovery than any past V-shaped rebound.
For example, when concerns about overvaluation of artificial intelligence (AI) shook the market on Nov. 5 last year, the KOSPI extended its decline, falling as much as 6% intraday. On the 7th, the day before the rebound, the KOSPI was at 3,953, and on the next trading day it bounced to 4,073, up about 3%.
Also, when trade tensions escalated due to reciprocal tariff impositions by the United States in Apr. 2025, the KOSPI index fell 5.5% in a day. It then took three trading days for the index to claw back a substantial portion of the loss, with a rebound of about 4.8%.
In Aug. 2024, when fears of a U.S.-led recession sent stocks tumbling, the rebound was also more gradual than now. On Aug. 5, the KOSPI index plunged 8.8%, and the rebound the next trading day was limited to 3.3%.
Expanded market liquidity is cited as a reason the rebound has been stronger than in the past. As more participants enter the market, reactions to events have intensified. According to Korea Exchange (KRX), on the 4th, KOSPI market trading volume was 1,637.6 million shares, four times the level at the start of the year (406.33 million shares).
Another factor behind the heightened volatility is that Korea's stock gains outpaced global markets. Han Ji-young, a researcher at Kiwoom Securities, said, "The swift pullback reflects the nature of quickly giving back prices after an excessively fast surge," adding, "From the perspective of foreign investors, conditions outside are looking unsettled, so they appear to be prioritizing strategies to cash out in Korea, which offers the best liquidity and marketability worldwide."
Analysts advise that while the market is rebounding, volatility remains high, so it is necessary to focus on corporations' fundamentals. The key variables that will determine the market's course are whether the United States and Iran escalate and the risk of a Strait of Hormuz blockade.
Lee Eun-taek, a researcher at KB Securities, said, "After panic selling, markets more often show 'W-shaped' rebounds than 'V-shaped,'" noting the need to prepare for additional sharp swings. Lee added, "In a crash, what matters is fundamentals," explaining, "In an expansion phase of the business cycle, declines have generally been around 20%, so a short-term plunge can be a buying opportunity."