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Sidecar curbs jump as market volatility grips KOSPI
A dealer works at the dealing room of Hana Bank’s headquarters in Seoul, Monday, when a sell-side sidecar was triggered on the KOSPI amid a sharp market drop. Yonhap
By Jun Ji-hye
Korea’s stock market has experienced exceptional volatility this year, triggering 10 sidecar measures on the benchmark KOSPI, the second-highest annual tally on record, the Korea Exchange (KRX) and industry officials said Wednesday.
The mechanism temporarily halts program trading for five minutes during sharp market swings to curb excessive volatility.
In March alone, seven sidecars were activated as markets were rattled by surging global oil prices and mounting pressure from a weakening won amid the Middle East conflict.
According to the KRX, the 10 sidecar activations this year comprise six sell-side and four buy-side measures. Sell-side curbs were triggered on Feb. 2 and 6, and March 3, 4, 9 and 23, while buy-side measures were imposed on Feb. 3 and March 5, 10 and 18.
The secondary Kosdaq market has also faced heightened volatility, with six sidecars triggered this year — four on the buy side and two on the sell side.
On the main board, a sidecar is triggered when front-month KOSPI 200 futures move more than 5 percent from the previous close and sustain the change for at least one minute. On the Kosdaq, the measure is activated when Kosdaq 150 futures fluctuate by more than 6 percent and the Kosdaq 150 index moves more than 3 percent for at least one minute.
On an annual basis, this year’s sidecar count on the KOSPI ranks as the second-highest since records began in 2002, trailing only the 26 cases recorded during the 2008 global financial crisis.
The current level of turbulence is particularly striking, given that most years typically saw just two to seven cases.
The surge in volatility has been driven by soaring oil prices and rising interest rates following the Middle East conflict involving the United States, Israel and Iran, amplifying investor anxiety.
Heightened concerns that Korea, a major importer of Middle Eastern crude, could face outsized economic fallout have led to sharper swings in domestic markets compared with global peers, with equities falling and the won weakening rapidly.
Volatility peaked on March 4 and 9, when a spike in oil prices triggered panic selling, sending the KOSPI sharply lower and prompting back-to-back circuit breakers that briefly halted trading in both equities and futures.
It marked the first time in about four years that two circuit breakers were imposed within a single month, last seen in March 2020 at the height of the COVID-19 pandemic.
Han Ji-young, an analyst at Kiwoom Securities, said the KOSPI has recently shown price swings rarely seen even during past crises.
“Sidecar curbs have been triggered nearly once every two trading sessions this month, underscoring how fragile market conditions have become,” Han said.
Most analysts expect elevated volatility to persist. Kang Dae-seung of SK Securities said that since the outbreak of the Iran conflict, rising oil prices and growing concerns over stress in private credit markets have dampened risk appetite.
“The frequent activation of sidecars and circuit breakers reflects a sharp buildup in short-term market anxiety,” Kang said.