Summary

  • The Kospi extended its plunge into a second day, breaking below the 5,000 level on the Kospi, while market-wide trading was temporarily halted.
  • The economic and financial F4 reviewed foreign selling pressure, stock-market volatility, and the risk of contagion spreading to the currency and bond markets.
  • Circuit breakers and sell-side sidecars were triggered in quick succession, underscoring a sharp deterioration in investor sentiment.

Forecast Trend Report by Period

Closed-door meeting at 10:30 a.m.

Discussion of responses for stock, currency and bond markets

South Korea’s top economic and financial policymakers held a second straight meeting as they responded to a sharp plunge in the Kospi. They reviewed financial market conditions and response measures after the index fell below 5,000 shortly after the open and trading across the market was temporarily halted.

According to related authorities on November 6, Deputy Prime Minister for Economic Affairs and Finance Minister Lee Hyoung-il, Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eog-won, and Financial Supervisory Service Governor Lee Chan-jin held a private meeting at 10:30 a.m. The four are collectively known as the “F4,” which coordinates South Korea’s economic and financial policy.

The participants examined foreign selling pressure and stock-market volatility, and checked whether market stress could spread to the foreign-exchange and bond markets. They were also set to discuss external risk factors and measures needed to stabilize markets. The additional meeting followed talks a day earlier on the impact of the U.S. midterm elections on domestic and global financial markets.

South Korean stocks extended their slump for a second day. The Kospi fell 471.89 points, or 8.76%, to 4,911.91 at 9:03 a.m. on November 6. At the same time, the Kosdaq dropped 46.65 points, or 6.88%, to 631.76.

The Korea Exchange triggered a circuit breaker in the KOSPI market at 9:03 a.m., halting trading for 20 minutes. The measure came after the Kospi stayed down more than 8% from the previous session’s close for one minute.

A day earlier, the Kospi closed down 5.28% at 5,383.80, while the Kosdaq ended 5.11% lower at 678.41. Sell-side sidecars, which temporarily suspend the validity of program sell orders, were triggered in both markets as investor sentiment deteriorated sharply.

Doohyun Hwang