The stock plunge came as fears of the global economic recession from the COVID-19 outbreak battered investors' sentiment. The Dow Jones Industrial Average dropped 10 percent overnight in its worst day since the Black Monday crash of 1987.
Korea Exchange, the bourse operator, issued a circuit breaker on the Kospi at 10:43 a.m. local time to halt trading for 20 minutes. It was issued as the index dropped over 8 percent for more than a minute.
The Kospi tumbled 149.40 points, or 8.14 percent, to trade at 1,684.93 at the time. It marked the first time in about 18 and a half years that the circuit breaker was activated in the main bourse.
Four minutes after the open, the small-cap Kosdaq plummeted over 8 percent for more than a minute, triggering the circuit breaker.
It was the first time that the circuit breaker was activated both in the Kospi and the Kosdaq in a single day.
At 9:06 a.m. local time, a sidecar was activated in the Kospi for the second straight day to suspend program trading for five minutes. It is imposed when stock futures fluctuate more than 5 percent for at least a minute.
The sidecar was issued in the Kosdaq at 9:38 a.m. local time.
Both the Kospi and the Kosdaq technically sank into bear market as they retreated more than 20 percent from their 52-week highs.
Julie Cho, a stock analyst at NH Investment & Securities in Seoul, said in a report that stocks fell into bear market on doubt over whether massive quantitative easing from the United States and Europe would be effective to bolster the global economy.
Other market watchers here took a more cautious stance, saying it was too early to conclude that the stock market entered into a "real" bear market given that fiscal stimulus packages from major economies in the near future could alter the market sentiment into optimism.
Unease over the COVID-19 outbreak drove foreign investors to dump local bonds and currency as well as stocks.
The won/dollar exchange rate jumped 18.4 won to 1,224.8 won per dollar in early trading, marking the highest in about four years since March 2016.
Bond prices went lower. Yields on the liquid three-year treasury notes went up 10.7 basis points, and the return on the 10-year government bonds surged 16.2 basis points. Yields on the 20-year and 30-year sovereign debts soared 17.0 basis points and 12.7 basis points respectively.
South Korean President Moon Jae-in convened a special meeting on economic and financial situations with deputy prime minister for economic affairs, the top central banker, the financial regulator chief, and the trade and industry minister, according to the presidential Blue House.
Expectations ran high for the Bank of Korea (BOK) to cut its benchmark interest rate from the current record low of 1.25 percent in the foreseeable future.
The U.S. Federal Reserve slashed its target rate by 50 basis points to a range of 1.00-1.25 percent late last month in its first emergency move since the 2008 global financial crisis.
The South Korean policy rate fell below the U.S. counterpart with the Fed's emergency move. The BOK cut its target rate by 75 basis points in its emergency move in October 2008 to tackle the global financial crisis.
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