This year, volatility in Korea's stock market is drawing close to levels seen during the 2008 global financial crisis. With the Korea Exchange (KOSPI) sidecar (a temporary halt to program-trading order effectiveness) already triggered 20 times before the first half has even ended, the prevailing view is that it will soon surpass the annual record set in 2008.
According to the Korea Exchange (KRX) on the 3rd, a total of 20 sidecars have been triggered in the KOSPI market so far this year. There were 11 buy sidecars due to a sharp market rise and 9 sell sidecars due to a steep decline.
This amounts to one-quarter of the 80 cumulative triggers since 2002, when the Korea Exchange (KRX) began officially compiling related statistics. If the current volatility continues, the annual cumulative number of triggers this year is likely to set a record high.
The previous all-time high was 26 in 2008, when the global financial crisis swept the world. Amid the U.S.-driven financial shock, the KOSPI index plunged over the year from the 1,900 level to the 800 level. The KOSDAQ market also saw 19 sidecars triggered that same year, reflecting severe turbulence.
In particular, in 2008 there was only one KOSPI sidecar trigger in the first half. However, 25 sidecars were triggered in the second half of the same year (from September) after the Lehman Brothers bankruptcy erupted.
This year, the KOSPI market has maintained high volatility every month from the start of the year rather than concentrating at a particular time. Starting with three triggers in February, there were as many as seven sidecars in March alone. There were three in April and six last month, extending the sharp swings. Even this month, a buy sidecar was triggered on the 1st, and by the first half the market is already experiencing volatility at an all-time high level.
Market experts cite strong expectations for the semiconductor cycle and external risks as the main reasons the market is riding a roller coaster this year.
Analysts say a seesaw pattern is repeating, where funds pour into major semiconductor stocks amid exploding demand for artificial intelligence (AI), sending the index surging, only for investor sentiment to freeze and the index to plunge whenever concerns about delayed AI investment or a semiconductor peak-out emerge.
Still, in the securities industry, the view is gaining traction that even amid these short-term spikes and drops, the medium- to long-term upward trajectory of the domestic market itself will remain intact.
Given the overall recovery in the semiconductor sector and the still-intact momentum of expanding global AI investment, the assessment is that the market's fundamental direction has not turned, even if bouts of volatility repeat.
A sidecar is a mechanism used to minimize the impact that sharp futures-market swings have on the cash market. The KOSPI sidecar is triggered when the KOSPI 200 futures price rises or falls by 5% or more from the previous day's close and that condition persists for at least one minute.