Kospi triggers circuit breakers more times this year than during 9/11 and COVID-19 combined

Sidecars already triggered 23 times, approaching annual record set during global financial crisis

Circuit breakers activated 3 times this year — most in Kospi history

Market emergency alerts now more frequent than during 9/11 attacks or COVID-19 pandemic

The Kospi has fallen into a period of unprecedented volatility. Circuit breakers have already been triggered three times on the benchmark index this year — a frequency with no parallel in the history of South Korea's stock market.

Sidecars have been activated 23 times through June 9, approaching the annual record of 26 set during the global financial crisis. That works out to roughly once every five trading days — in effect, once a week. Emergency market safeguards once associated with the Sept. 11 attacks or the COVID-19 pandemic are now appearing with routine regularity, prompting analysts to describe the Kospi as stuck in a "bipolar" market of extreme swings.

Korea Exchange data released Wednesday showed that of the 23 sidecars triggered in the Kospi from the start of the year through June 9, 12 were buy-side and 11 were sell-side.

The figure is approaching the record set during what is widely regarded as the most volatile period in South Korean market history. During the 2008 global financial crisis, sidecars were triggered 26 times for the full year — 14 buy-side and 12 sell-side.

With less than half the year's trading days elapsed, the market has already reached roughly 90 percent of that crisis-era total. If the current pace continues, the full-year count is likely to far surpass the 2008 record by December.

The frequency is striking. Over roughly 160 calendar days from January through June 9, sidecars fired 23 times — once a week on average, or once every five trading days.

Recent market action has resembled a roller coaster. A sell-side sidecar was triggered on Friday amid a sharp selloff that traders dubbed "Black Friday." The following Monday brought another sell-side sidecar, freezing investor sentiment in what markets called "Black Monday."

Yet just one day later, on Tuesday, the market surged and triggered a buy-side sidecar. The pattern of sentiment swinging from fear to greed within a single trading day has become a recurring feature.

Sidecars are normally triggered when the market moves sharply in one direction. This year, however, sell-side and buy-side activations have been alternating within days — sometimes within a single day — as steep drops and sharp rebounds follow each other in rapid succession.

Market participants are increasingly forced to bet on volatility itself rather than on market direction. Some in the brokerage community have begun saying that predicting volatility has become more important than predicting share prices.

The extreme swings have also pushed circuit breakers — a stronger safeguard than sidecars — into unusually frequent use.

A circuit breaker halts all trading across the market when the index falls beyond a set threshold. Where a sidecar temporarily restricts program-trading asking prices, a circuit breaker stops all buying and selling outright — a far stronger warning signal.

Three circuit breakers have been triggered on the Kospi this year, a record for any single year in South Korean market history. Korea Exchange statistics show only nine circuit breakers have ever been activated on the Kospi in total; one-third of them have come in 2026 alone.

Circuit breakers have historically been seen as symbolic events reserved for national or global crises. Only one was triggered during the Sept. 11, 2001 terrorist attacks in the United States. Even during the COVID-19 pandemic shock that swept financial markets in 2020, the mechanism was activated just twice.

This year is different. Circuit breakers are being triggered repeatedly even without a single large-scale shock of the kind seen during Sept. 11 or the pandemic. A measure once considered a once-in-decades event has become a familiar sight for investors.

Market experts say volatility is being amplified by a combination of factors: the AI investment outlook, geopolitical uncertainty, the expansion of algorithmic trading, rising leveraged positions, and the accelerating pace of global capital flows.

"The AI theme is in a transitional phase, shifting from large-scale hardware and infrastructure build-out driven by big tech investment toward a stage where companies adopt AI to boost productivity and expand software sales," said Choi Jae-man, a researcher at Kiwoom Securities. "During this transition, the gap between the pace of technological advancement and actual monetization will periodically trigger cycles of market expectation and disappointment, generating intermittent bouts of volatility."

Choi added that investors should prepare proactively for greater portfolio volatility in the second half of the year, given the pace of share price gains and sector concentration seen in the first half. "With geopolitical risk persisting, the possibility of prolonged inflationary pressure from energy supply shocks — and the resulting uncertainty over Federal Reserve monetary policy — stands as a key alert factor for financial markets in the second half," he said.

th5@heraldcorp.com