South Korea's KOSPI swings 7% on leveraged‑ETF selloff, triggering sidecar trading halt

On July 3 the South Korean KOSPI index experienced extreme volatility, falling as much as 7% after a massive institutional net sell‑off of roughly ₩2.8 trillion. The selling was driven by rebalancing of single‑stock leveraged ETFs, whose futures‑based exposure required rapid unwinding at the market close. Financial‑investment and trust firms accounted for over 80% of the net sell‑off.

The sharp decline was later followed by a rapid rebound of more than 5%, prompting the Korea Exchange to activate the program‑buy‑order “sidecar” mechanism, which temporarily halted automated buying for five minutes. At the peak of the rebound the KOSPI was up 5.33% to 8,055.68, with Samsung Electronics gaining about 8% and SK Hynix about 10%. Analysts noted that leveraged‑ETF rebalancing amplifies market moves, especially in a semiconductor‑heavy index.

The episode underscores the impact of leveraged‑ETF structures on market stability and the effectiveness of the sidecar safeguard designed to temper abrupt price swings.