South Korean stocks rose steeply Tuesday, triggering successive temporary suspensions of program buy orders, known as sidecars, in both the KOSPI and KOSDAQ markets. A buy-side sidecar is triggered when KOSPI 200 futures (nearest month) rise 5% from the previous trading day and the gain persists for one minute. The KOSPI plunged about 8% and the KOSDAQ about 9% on Monday, but both surged the following day, underscoring sharply increased volatility in the domestic market.
The Korea Exchange announced that program buy orders on the stock market were suspended for five minutes at 9:12 a.m. due to a rise in KOSPI futures prices. At 9:28 a.m., a buy-side sidecar was triggered in the KOSDAQ market, cooling the heated market sentiment. The KOSPI opened 2.85% higher at 7,697.76 before extending gains to as high as 7,847.74. The KOSDAQ opened up 2.89% at 937.69 and at one point reached 957.96.
Most top market-cap stocks rose. Samsung Electronics was trading at 304,250 won, up 2.96%, while SK hynix was at 2,031,000 won, up 6.28%. Samsung Electronics reclaimed the 300,000-won mark and SK hynix recovered the 2-million-won level. Excluding preferred shares, SK Square, ranked third by market cap, rose 4.92%, while fourth-ranked Samsung Electro-Mechanics gained 8.59%. In the KOSDAQ market, Alteogen surged 15.89%, while EcoPro BM (2.79%), EcoPro (1.81%) and Rainbow Robotics (3.44%) all advanced.
The previous day, the country's two main markets faced a "Black Monday," plunging nearly 10% and triggering circuit breakers. The KOSPI closed at 7,484.41, down 676.18 points (8.29%) from the previous trading day. A circuit breaker was triggered early in the session. A circuit breaker halts trading across the entire market in stages for 20 minutes or until the close when the index falls 8%, 15% or 20% or more from the previous trading day and the drop persists for one minute. A circuit breaker was also triggered in the KOSDAQ market, which fell more than 9%.
Volatility in the domestic market has been expanding recently. The KOSPI closed at 8,801.49 just on the 2nd of this month, nearing a close above the 9,000 level, but then fell for three consecutive trading days starting on the 4th. The KOSDAQ declined steeply on the 5th and 8th. "The shock from the two-day plunge was so severe that the phase of expanded volatility could continue this week," said Han Ji-young, an analyst at Kiwoom Securities.
