With the KOSPI index plunging 10%, investors endured a nightmare Tuesday. As panic selling centered on Samsung Electronics and SK hynix erupted, the KOSPI fell by more than 900 points. By the magnitude of the drop, it was the biggest on record, with a steeper decline than on March 4, when the United States and Iran went to war.
As the KOSPI index tumbled 9.99%, a sell-sidecar and a circuit breaker were triggered back to back. The KOSDAQ index, which fell nearly 8%, slipped below the 900 level and a sell-sidecar was activated.
On the 23rd, the KOSPI index closed at 8,203.84, down 9.99% (910.71 points) from the previous trading day. The KOSDAQ index also ended at 891.52, down 7.94% (76.88 points). The KOSPI, which started above 9,000 points, briefly turned higher right after the open but soon reversed lower, surrendering the 9,000 level. The losses then deepened, knocking it down to the 8,200-point range.
Foreign investors and institutions dumped shares en masse. In the main board, foreigners sold about 5.8 trillion won and institutions about 5.5 trillion won. Individuals, by contrast, went on a record net buying spree, purchasing more than 11 trillion won. Notably, Samsung Electronics and SK hynix fell more than 12%.
As for the market crash, the securities industry largely viewed it as a possible technical correction after a recent surge in indexes. In particular, with most tech stocks falling in the U.S. market the previous day, investor sentiment toward domestic stocks also weakened.
Researcher Jo Ain at Samsung Securities said, "Investor sentiment weakened on the back of last night's declines in big tech stocks," adding, "As large-scale fundraising moves by artificial intelligence (AI) companies continue, doubts about the profitability of AI investments have resurfaced."
Researcher Lee Jae-won at Yuanta Securities Korea said, "As can be seen in the favorable trend in Asian stock markets, macro indicator volatility is also benign, and there have been no sharp spikes in interest rates or oil prices," adding, "The cause of the correction is profit-taking supply in large-cap semiconductor stocks and a technical adjustment."
Lee said, "I do not judge that any issues have been found in fundamentals or macro conditions that would damage the KOSPI's uptrend," adding, "Because this is profit-taking supply that has always appeared after the breakouts of the 5,000 to 8,000-point ranges, it should be used as a buying-the-dip opportunity." Lee further noted that even the scale of the decline is only average when considering the increased market capitalization.
There was also analysis that the change the previous day (on the 22nd), when SK hynix overtook Samsung Electronics in market capitalization to take the No. 1 spot, influenced the wave of panic selling. Researcher Kim Dae-jun at Korea Investment & Securities Co. said, "Today's plunge was driven by panic selling sparked by short-term overheating pressures," adding, "It is easy to stoke overheating concerns when a company with smaller profits than the previous No. 1 takes the lead."
Some analysts also cite a "short gamma" effect stemming from single-stock leveraged exchange-traded funds (ETFs). They say the daily rebalancing structure of leveraged ETFs is almost the same as short gamma.
Researcher Kim Seok-hwan at Mirae Asset Securities said, "It appears to be less about fundamentals and more about growing technical correction pressure," adding, "From a liquidity perspective, we have emphasized short gamma, which fuels leverage effects in both rising and falling phases."
There is also analysis that remarks from the political sphere that "unrealized gains from stocks and real estate should be taxed" negatively affected the market.
At a forum titled "Plugging tax gaps on asset income and exploring a shift to an inclusive income tax principle," held at the National Assembly Members' Office Building in Yeouido that day, Senior Research Fellow Lee Sang-min at the Korea Institute of Public Finance said, "If taxation occurs only at the time of realization, taxpayers have an incentive not to sell assets to avoid or delay taxes, leading to a lock-in effect," adding, "This prevents capital from moving to more efficient places."