Korea Exchange to expand daily stock price limit

Daily stock price limit in the Korean stock and derivative product markets will be expanded to a wider range from Monday.

Korean Exchange has announced that it is set to expand the daily price limit of stocks, exchange traded fund (ETF) and exchange traded note (ETN) in its main KOSPI and secondary KOSDAQ markets from the current ±15 percent to ±30 percent. Price limit per product in the derivative market is also raised from ±10-30 percent to ±8-60 percent. The price limit on shares traded in the KONEX, a specialized stock market for small- and medium-sized companies, is maintained at the current level (±15 percent).

With the expansion of the daily share price limit, stock prices per industry may change by up to 60 percent a day. It used to take five trading days to cut stock prices in half, but it will take only two days to halve share prices from Monday. Industry insiders pointed out that investors need to invest with more caution as the daily price limit expansion grows risks.

The Korean bourse operator has prepared various complementary measures, such as a phased circuit breaker (temporary suspension on CB and trading), to reduce increased volatility in the market generated by the daily price cap expansion. Also, market monitoring and supervision will be tightened including focused inspection on volatile stocks.

minwoo@donga.com