KOSPI Suffers Worst Single-Day Drop in 43-Year History

South Korea's stock market recorded its largest single-day decline in history as investors engaged in unprecedented panic selling.

The KOSPI index plunged 12.06% on the 4th, marking the steepest drop since the benchmark's launch in 1983. The decline surpassed previous records set after the September 11, 2001 terrorist attacks (12.02%), the dot-com bubble in 2000 (11.63%), and the 2008 global financial crisis (11.63%), putting the hard-won 5,000-point level at risk.

The KOSDAQ also posted its largest-ever single-day decline. The domestic market, which had surged rapidly on expectations for corporate governance reform under the current administration and booming leading sectors, faced questions about its fundamentals after falling more steeply than other countries' markets following the outbreak of the U.S.-Iran war.

According to the Korea Exchange, the KOSPI closed at 5,093.54, down 698.37 points (12.06%) from the previous session. Both the percentage decline and point drop were the largest since the index's inception—steeper than falls during the 9/11 attacks, the early 2000s dot-com bubble, the 2008 global financial crisis, the COVID-19 pandemic, and the Asian financial crisis.

The point decline shattered the previous record of 452.22 points set just one day earlier on the 3rd, exceeding it by more than 200 points in a single trading session. The KOSDAQ closed at 978.44, down 159.26 points (14.00%), also a record single-day percentage drop.

Panic selling erupted immediately at market open. The KOSPI opened nervously at 5,592.59, down 3.44%, while the KOSDAQ started at 1,112.08, down 2.25%. Both indices quickly extended losses to the 6% range. As futures markets collapsed alongside equities, sidecar trading halts were triggered on both the KOSPI and KOSDAQ shortly after regular trading began. Sidecars temporarily suspend program trading to calm markets during periods of heightened volatility.

Fear continued to spread, and circuit breakers halting all stock trading were triggered after 11 a.m. This marked the first KOSPI circuit breaker activation in approximately 18 months, since August 5, 2024. Both indices continued extending losses, ultimately plunging more than 10% each in a single day.

The domestic market had risen sharply over the past year. After closing above 3,000 on June 20 last year, the KOSPI broke through 4,000 on October 27 and surpassed 5,000 on January 27 this year, ushering in the era of "KOSPI 5,000." Breaching 6,000 roughly a month later prompted rosy forecasts from securities firms predicting a push toward 7,000.

The short-term rally was attributed to expectations for governance reform and booming leading sectors including semiconductors, shipbuilding, and defense. However, following the outbreak of the U.S.-Iran war, both the KOSPI and KOSDAQ suffered consecutive sharp declines, with steeper drops than other Asian markets raising doubts about underlying fundamentals.

A securities industry official said, "While the domestic market's rapid short-term decline has raised questions about fundamentals, the governance reforms and corporate earnings growth that drove the rally remain intact. Though it is difficult to predict market trends with certainty, we do not expect the sharp decline to persist for an extended period."