Finance ministry orders 24-hour market monitoring after sharp stock plunge

The finance ministry said Wednesday it would implement 24-hour joint monitoring with relevant agencies after the local stock market suffered a severe downturn fueled by global semiconductor uncertainties. Deputy Prime Minister and Finance Minister Koo Yun-cheol chaired an emergency meeting late July 29 with the governor of the Bank of Korea and top financial regulators to address the rapid expansion of market volatility.

The Kospi dropped 10.84 percent on July 28 before falling another 5.98 percent the following day. Officials assessed that while fundamental economic indicators remain solid, investor psychology had contracted sharply due to supply and demand imbalances. The recent plunge was driven by intensifying memory competition from China and spreading concerns over capital raising by major U.S. tech firms, which triggered a steep fall centered on the semiconductor sector.

"Participants agreed that the decline was largely due to shrinking investor sentiment and supply-demand instability during a correction phase following recent sharp stock price rises," officials stated following the meeting. Despite the volatility, attendees noted that exports of key items like semiconductors remain strong and corporate operating profit forecasts for listed companies have been revised upward.

In response, the government decided to immediately push for stricter controls on single-stock leveraged products, which participants agreed were exacerbating the market turbulence. New measures include increasing transaction costs to deter excessive trading behaviors and establishing a legal basis for emergency stabilization actions. Authorities also plan to introduce mock trading systems alongside existing pre-trade education requirements.

These steps build upon supplementary measures announced July 16, which temporarily halted new listings of single-stock products and raised the basic deposit requirement to 30 million won in cash starting July 31. To ensure long-term stability, the committee also committed to accelerating structural improvements in the capital market, including efforts to induce listed companies to enhance corporate value and improve governance structures.