Kospi, Kosdaq double their daily trading ranges

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Kospi, Kosdaq double their daily trading ranges

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Korea’s stock markets Monday welcomed the first day of a much higher daily trading range for shares, which was raised from 15 percent to 30 percent on both the large-cap Kospi and the small-cap Kosdaq.

This was the largest adjustment in the past 17 years. The last raise in the daily trading range on Kospi stocks was from 12 percent to 15 percent in December 1998.

The change could translate into doubled profit margins for investors on good days. It could also allow double the losses on bad.

Both the Kospi and Kosdaq markets saw some shares skyrocket close to the new limit.

Seven shares in the Kospi market saw their prices jump by more than 20 percent.

Taeyang Metal Industrial jumped 29.74 percent to close at 1,985 won ($1.78), while Samyang Holdings rose 29.63 percent to close at 157,500 won following positive forecasts about its second-quarter performance. Technology-based company Gene One Life Science saw its shares rise by 25.54 percent, and SC Engineering 17.36 percent.

On the Kosdaq, six shares saw their prices jump 20 percent or more. Jeju Semiconductor & Creative Power Plant jumped 29.93 percent to 9,420 won as the company was reported to have attracted investment from China, while GT&T jumped 29.81 percent to close at 1,350 won and Daeho PNC rose 29.78 percent to close at 1,290 won. Rorze Systems Corporation, NeoFidelity and InBody saw rises of 23.68 percent, 21.27 percent and 20 percent, respectively.

No shares on either market plummeted. The Korea Exchange saw daily trading volume shrink to 8.68 trillion won, about 4.76 trillion won on the Kospi and 3.3 trillion won on the Kosdaq.

“I don’t think the policy will bring drastic volatility to the market,” said Seo Myung-chan, a market analyst at Kiwoom Securities, “because those large-cap shares that determine the market’s direction like Samsung Electronics and Hyundai Motor won’t fluctuate by 20 to 30 percent.”

The Financial Services Commission last November announced it would double the trading range as part of its stock market advancement policies to encourage more active trading.

To avoid excessive price volatility, the bourses will impose a two-minute cooling off period for any stock that moves more than 10 percent. If either index falls in excess of 8 percent for more than a minute versus the previous close, all trading of shares will be halted for 20 minutes, it said.

“The raised daily trading range is expected to raise trade volumes in the stock market,” said Seo. “At the same time, however, it also raises risks of prices being overblown or price fluctuations, which may bring massive damages to retail investors, the so-called ‘ant investors.’”

Investors should carefully watch individual shares, especially small- to mid-cap shares that are easily swayed by rumors.

“Despite risks, the eased daily trading range will help investors distinguish good and bad shares more easily,” Seo added.

BY KIM JI-YOON, BLOOMBERG [kim.jiyoon@joongang.co.kr]
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