Korea Exchange after-market draws heavy retail trading, sharp volatility
The Korea Exchange in Yeouido, Seoul, is seen during after-hours trading, Monday. Yonhap
Kim Ji-ho stared at his stock trading app in confusion on Monday evening. He knew that the after-hours market was opening and noticed that a stock he was interested in had risen 10 percent. But by the time he returned from the bathroom, all the gains had disappeared.
"It was a little scary, so I don't think I'll be trading in the after-hours market for a while," said Kim, a 25-year-old college student.
For investors who eagerly jumped in, the experience was not entirely satisfying either.
Some brokerages experienced technical glitches, while some investors said the new system was confusing because they could not easily distinguish regular-session closing prices from prices in the after-hours session.
Others said the separate Korea Exchange (KRX) and Nextrade after-hours markets made trading more cumbersome and confusing, as investors had to choose between two different order screens.
The KRX extended stock trading hours Monday, allowing almost all listed stocks to be traded between 4 p.m. and 8 p.m. Until now, Nextrade, an alternative trading system, had been the only option for after-hours trading, with trading largely limited to large-cap stocks.
According to the KRX, trading value in the after-hours market reached 1.82 trillion won ($1.3 billion) on the first day, with 72.24 million shares changing hands. The figure accounted for 6.6 percent of the KRX's total daily turnover of 27.6 trillion won.
Retail investors dominated the session, accounting for 93 percent of trading, compared with 3.9 percent for foreign investors and 2.1 percent for institutional investors.
Some stocks showed extreme volatility. During the after-hours session, volatility interruption mechanisms were triggered 1,637 times, more than four times the 400 activations recorded during regular trading hours.
Hanwha Galleria, for instance, surged in after-hours trading on speculation that the company could sell its department store in Daejeon.
The stock jumped 15.4 percent from its regular-session closing price at around 4:20 p.m., prompting volatility interruption measures twice, at 4:13 p.m. and 5:13 p.m. The rally, however, did not last. The gap between its intraday high and low during the after-hours session reached 19.2 percent.
Volatility was particularly severe among small- and mid-cap Kosdaq stocks with market capitalizations of around 30 billion won. PonyLink and Valofe posted intraday price swings of 32.35 percent and 32.01 percent, respectively. Yuhwa Securities and HL Science also recorded swings of 28.15 percent and 27.92 percent, respectively.
Market participants attributed the heightened volatility to relatively low participation during the market's early days.
"If trading volume remains thin, liquidity could become fragmented across sessions and undermine price stability," said Yeo Mil-lim, a senior research associate at the Korea Capital Market Institute.
"Following the launch of the after-hours market, authorities should systematically assess market quality and operational stability and reflect the findings in the planned pre-market session," Yeo added.