Kospi Plunges 8%, Circuit Breaker and Sell-Side Sidecar Fire Together
The Kospi fell as much as roughly 8% intraday, sliding into the 8,170-8,288 range. After the drop held above 8% for a full minute, a circuit breaker halted all Kospi cash and related derivatives trading for 20 minutes; the index failed to fully recover even after trading resumed. Foreigners dumped roughly 3 trillion won worth of stock and institutions sold 600-700 billion won, with financial investment firms and the National Pension Service identified as the main institutional sellers.
The Kosdaq fell a milder 4-5%, with foreigners and institutions actually turning net buyers there, a striking contrast to the Kospi. Advancing issues on the Kospi numbered only about 60-70, underscoring how broadly the market was suppressed; the Kosdaq saw roughly 130 gainers. Most large-cap names posted losses ranging from 15% to as much as 45%.
The won weakened further as the dollar index climbed past 101, reflecting anxiety over U.S. interest rates. Hosts attributed the day's extreme swing to the compounding of leveraged products and ETF mechanical selling. When bellwether stocks fall more than 5%, the index drops, which triggers programmatic ETF basket selling, which in turn drags individual names down further in a self-reinforcing loop.
Leverage multipliers embedded in leveraged ETFs amplify this cycle further, pushing Korean market swings well beyond those seen in Japan or Taiwan, the hosts noted. They stressed that such amplified volatility is no longer a one-off event but has become a structural feature investors must now factor into every trading day.
The hosts also criticized how the National Pension Service executes its trading. In principle, pension money should stabilize the market by selling when prices overshoot and buying when they overcorrect. In practice, the outsourced asset managers chase relative performance against peers, which ends up amplifying volatility rather than dampening it.