The KOSPI plunged 7.6% in a day and trading even halted. After a day like this, does the market usually rebound or fall further?
2026-10-16
Does a rebound follow a circuit breaker?
The KOSPI's -7.57% (5,554.22) is a plunge produced by market structure, so it is worth comparing with past cases. In short, price rebounds often occur, but how long they last is decided by foreign investors.
Past records point to a rebound
Per industry summaries, five-session returns after major plunges were +10.1% in the Iran war episode, +2.3% after 9/11, +5.6% in the dot-com bust and +18.6% in 2008 (local reports such as Korea JoongAng Daily). However, these figures are media tallies, and I could not find a study that rigorously examines returns after circuit breakers.
This year the rebound formula has weakened
The same reports point out that next-day rebounds after plunges used to be common, but recently further declines have followed. The KOSPI circuit breaker has been triggered 13 times since its introduction in 2000, and as of late July seven of those were this year. Today's report says this is the 10th this year, so as triggers repeat it looks less like 'shock then rebound' and more like 'permanent volatility.' There is also criticism that sidecars pile up orders for five minutes and release them at the restart, amplifying volatility.
The variable is whether foreigners turn to net buying
Hana Securities' analysis says a rebound signal comes when foreign buying overlaps with individual selling, and that performance after plunges varied with foreign sentiment. Now the opposite pattern holds: foreigners have been net sellers for eight straight sessions while individuals and institutions absorb the selling. In the July 29 case too, foreigners net sold about 830 billion won while institutions bought 3.7 trillion won.
Scenarios
| Path | Condition | KOSPI direction |
|---|---|---|
| Technical rebound | Foreign net selling shrinks to the 1 trillion won range and the won holds the 1,340 level | Short-term rebound, then sideways in the 5,500-6,000s |
| Renewed decline | Foreign selling in the 3 trillion won range resumes, CoreWeave bond yields rise further | Retest of the low 5,000s |
| Earnings rebound | Late-October Samsung Electronics and SK Hynix earnings and shareholder returns confirmed | Foreign return begins |
The valuation trap
A forward P/E of 10.8x falling to 5.5x, and 4.0x for chips, looks cheap. But the P/E may be low because the market assumes 'earnings will turn down.' October 1-10 chip exports of +170.9% are real-economy data that rebut this assumption. How fast prices catch up to earnings depends on how fast credit worries subside.
What should investors do
- Avoid chasing purchases the day after a circuit breaker. If you buy in installments, it is safer after foreign net selling has been confirmed to slow for at least two days.
- Dollar-based investors should split currency hedging and position size, taking into account that EWY fell 11.9% over five sessions.
- Indicators to watch are daily foreign net buying, the won at 1,350 per dollar and earnings later this month.
(Sources: Korea JoongAng Daily, reports citing Hana Securities analysis, Korea Times 2026-07-30)