KOSPI soars by 134 points on first day of short-selling ban

South Korea’s stock markets witnessed explosive gains as the government's imposition of a full ban on short selling took effect on Monday. Hopes for ceasing the U.S. Federal Reserve's interest rate increases further buoyed the markets, leading to a historic rally. The KOSPI spiked by a record-high (134.03 points), and the KOSDAQ rose over 7%, triggering a sidecar for the first time in three years and five months. The foreign exchange market also fluctuated sharply as the won-dollar exchange rate plummeted by more than 25 won (the value of the won surged).

According to the Korea Exchange on Monday, the benchmark Korea Composite Stock Price Index (KOSPI) closed at a robust 2,502.37, leaping by an unprecedented 134.03 points, or 5.66%, and shattering the 2,500 level for the first time since late September. This spike is noted as the sharpest in the index's history, with its percentage gain placing it as the 46th largest ever recorded. The influx of purchases from foreign investors, who had previously divested heavily from the local market, contributed over 700 billion won to this surge, a stark turnaround from last month's sell-off.

In tandem, the KOSDAQ index soared by 57.40 points, a 7.34% increase, concluding the day at 839.45. This upswing marks the greatest single-day point increase since January 22, 2001. The rush of capital into the KOSDAQ was so intense that at 9:57 a.m., regulatory authorities activated the market's sidecar mechanism to temper the pace of trading, a measure not employed since June 6, 2020.

The significant increase in the stock market on this day was largely due to revived global investment sentiment, as expectations for the end of interest rate hikes grew when the U.S. Federal Reserve (Fed) froze the benchmark interest rate last Wednesday (local time), and U.S. employment figures fell short of market expectations.


dhlee@donga.com