Kospi slides below 6,700 as KRX after-market trading launches Monday

The Kospi tumbled more than 3 percent during trading Monday, retreating to the 6,600 range, as investor sentiment soured following the release of US August consumer price index data that fueled expectations of a benchmark interest rate hike at the September FOMC meeting. Concerns over calls to slow the pace of AI development added further pressure on the market.

The index opened down 217.30 points, or 3.14 percent, at 6,692.61. Foreign investors and institutions posted net selling of 1.62 trillion won ($1.21 billion) and 451.5 billion won, respectively, dragging the index lower, while retail investors were the sole net buyers at 1.77 trillion won.

The US August headline CPI rose 0.4 percent month-on-month and 3.4 percent year-on-year, in line with market expectations. However, core CPI — which strips out volatile food and energy prices — climbed 0.3 percent from the previous month, exceeding the consensus forecast of 0.2 percent.

The stronger-than-expected core reading has reinforced expectations that the Federal Reserve will raise its benchmark interest rate at the September FOMC meeting. As of Friday, 16 of 20 global investment banks surveyed anticipated a September rate hike as the Fed's next policy move. The domestic market appears to have been pricing in that possibility throughout this week.

Comments from major Big Tech CEOs over the weekend calling for a slowdown in AI development also weighed on investor sentiment.

Anthropic CEO Dario Amodei warned on his blog Saturday (local time) about the potential for AI misuse and urged developers to slow the pace of model development to allow time for safety measures. SpaceX CEO Elon Musk echoed the sentiment, saying "he's right."

Large-cap stocks fell broadly. Samsung Electronics dropped more than 3 percent, while SK hynix slid more than 5 percent. SK Square fell more than 6 percent, and Hyundai Motor was also down more than 3 percent.

The Kosdaq was down 10.54 points, or 1.28 percent, at 810.10 at the same time.

Starting Monday, Korea Exchange (KRX) launched an after-market session allowing real-time stock trading from 4 p.m. to 8 p.m. The number of tradable stocks will expand sharply, from roughly 600 to more than 2,000, with the aim of broadening investor trading opportunities and competing with global exchanges for liquidity.

Previously, investors could trade after regular hours only through a single-price auction system operating in 10-minute intervals from 4 p.m. to 6 p.m. That system has now been abolished and replaced with a continuous order-matching session running from 4 p.m. to 8 p.m., in which trades are executed in real time on a first-come, first-served basis whenever matching buy and sell orders are entered.

Eligible securities include Kospi- and Kosdaq-listed stocks and depositary receipts, excluding those listed on the Konex market. Stocks not traded during the regular session that day, as well as those under administrative designation, with extremely low liquidity, or flagged as investment caution or investment risk issues, are excluded.

The number of tradable stocks will increase significantly. The current Nextrade (NXT) after-market handles only about 600 stocks, as NXT's daily average trading volume is capped at 15 percent of the total market under the Financial Investment Services and Capital Markets Act. Once the KRX after-market opens, investors will have access to more than 2,000 stocks. As of Friday, there were 943 Kospi-listed and 1,823 Kosdaq-listed stocks, for a combined total of 2,766.

ETFs and exchange-traded notes (ETNs) have been excluded from the after-market, reflecting industry concerns that including them could amplify market volatility. KRX plans to assess market stability and liquidity before deciding whether to bring ETFs and ETNs into the after-market at a later stage.

Order types are also restricted. Only limit orders with fixed prices — including standard limit orders, best-limit orders and most-favorable limit orders — are permitted. Market orders, midpoint orders and stop-limit orders, whose execution prices vary with market conditions, are prohibited to protect investors.

The daily price limit is set at ±30 percent of the previous day's closing price — the same as the regular session. This is a significant widening compared with the old after-hours single-price auction, which applied a ±10 percent limit based on the day's closing price.

To prevent sharp price swings, the same volatility interruption (VI) mechanism used in the regular session will apply. A dynamic VI is triggered when the expected execution price deviates by 3 percent or 6 percent or more from the immediately preceding price, pausing order acceptance for two minutes before resuming with a single-price auction. A static VI activates when the expected price deviates by 10 percent or more from the previous single-price execution; trading similarly resumes after a two-minute order-collection period.

Short selling is permitted. The uptick rule — which prohibits short-sell orders at or below the immediately preceding price — and its exceptions apply in the same manner as in the regular session.

The Nextrade after-market operates from 3:30 p.m. to 8 p.m. If an investor does not specify a trading venue, the brokerage will route the order to the most advantageous market based on execution probability and total transaction value under its smart order routing (SOR) policy.

Settlement for after-market trades follows the same T+2 schedule as the regular session, meaning trades settle two business days after the transaction date.

Investors should keep two key points in mind. Any unexecuted orders from the KRX regular session are automatically canceled at market close; investors must re-enter orders to trade in the after-market. NXT, by contrast, carries over unexecuted orders from the pre-market through the regular session and into the after-market.

Investors should also be mindful of volatility stemming from thinner liquidity. After-market trading volumes are lower than during the regular session, which can lead to larger price swings or difficulty executing orders at desired prices. Investors are advised to check prices and the order book before placing trades.