KOSPI Sidecar Activations Hit 20 This Year, Highest Since 2002

Volatility in the South Korean stock market has intensified this year, leading to the most frequent activation of 'sidecars' – a mechanism that temporarily halts trading to curb sharp price swings – since 2002. With the number of activations approaching the annual total seen during the global financial crisis, even before the end of the first half of the year, analyses suggest market anxiety is deepening. This surge is attributed to a combination of factors, including sharp stock market rallies led by the semiconductor sector and geopolitical uncertainties stemming from the US-Iran conflict.

According to the Korea Exchange, the KOSPI market has seen sidecars activated a total of 20 times this year. This figure represents 25% of all sidecar activations on the KOSPI market since 2002. Even with the first half of the year not yet complete, the number of sidecar activations is nearing the annual record of 26 set in 2008, during the global financial crisis, with only a six-point difference. Monthly activations were recorded as follows: three in February, seven in March, three in April, and six in May, with one more activation on June 1st, bringing the total to 20. By type, buy-side sidecars were triggered 11 times, and sell-side sidecars were triggered nine times.

A sidecar is a mechanism designed to prevent the transmission of sharp price movements in futures markets to the spot market. It suspends program trading orders for five minutes when the KOSPI 200 futures price deviates by 5% or more from a benchmark price. In addition to sidecars, the KOSPI market also saw its first-level circuit breakers activated on March 4th and 9th.

On the KOSDAQ market, sidecars were activated 11 times this year, marking the highest frequency since 2008. Of these, buy-side sidecars were triggered eight times, and sell-side sidecars were triggered three times.