Kosdaq surges 4% for third straight session, triggering historic run of buy-side circuit breakers

The Kosdaq index extended its rally into a third consecutive session Monday, triggering a buy-side sidecar for the third straight trading day — a first in the market's history.

Institutional bargain-buying, a rotation of funds from the Kospi into the Kosdaq, and expectations for government policies to revitalize the Kosdaq market all converged to lift investor sentiment, sending most large-cap stocks sharply higher.

According to Korea Exchange, the Kosdaq stood at 773.04 as of 11:14 a.m. Monday, up 35.69 points, or 4.84 percent. The index has maintained gains of 4 to 5 percent and has risen for three consecutive sessions since July 31.

The index opened up 10.84 points, or 1.47 percent, at 748.19 and extended its gains throughout the morning, at one point surging as high as 780.63 during trading.

Institutions led the advance, posting net purchases of around 380 billion won ($273 million) on the day. Individual investors and foreign investors were net sellers of approximately 170 billion won and 200 billion won, respectively.

Amid the sharp rally, a Kosdaq buy-side sidecar was triggered at 10:47 a.m. Monday — the third consecutive trading day the mechanism has been activated. Korea Exchange said it was the first time in history that a buy-side sidecar had been triggered on three straight trading days in the Kosdaq market.

A Kosdaq sidecar is activated when the Kosdaq 150 futures price rises 6 percent or more from its reference price and the Kosdaq 150 index climbs at least 3 percent above the previous session's closing level, with both conditions holding simultaneously for one minute.

Most of the market's top stocks by capitalization were trading higher, with Alteogen up 7.32 percent, Ecopro up 5.43 percent, Ecopro BM up 3.31 percent, Jusung Engineering up 3.83 percent, and Rainbow Robotics up 0.44 percent.

The gains appear to reflect a rotation into Kosdaq as the Kospi has undergone a correction in recent weeks. Some market observers have noted that regulatory measures — including a hike in the minimum deposit requirement for single-stock leveraged products — may have accelerated the shift of funds into the Kosdaq.

The perception that Kosdaq stocks offer strong value after underperforming the Kospi in the first half of this year has also been cited as a factor drawing buyers into the market.

The Kospi, by contrast, was mixed. As of the same time, the index was down 6.18 points, or 0.10 percent, at 6,251.27.

The index had opened up 93.93 points, or 1.50 percent, at 6,351.38 and extended gains to as high as 6,389.40, but subsequently reversed course and fell as low as 6,080.25 during trading before paring losses to trade near flat.

In the Kospi market, individual investors and foreign investors were net buyers of 371.1 billion won and 120.3 billion won, respectively, while institutions were net sellers of 554.9 billion won. With buying and selling pressure intensifying among different investor groups, the index struggled to find a clear direction.