On May 22, 2026, the Korea Exchange activated a 'buy-side sidecar' on the KOSDAQ, temporarily halting program trading buy orders to cool an overheated market open.
This event was not a sign of instability, but rather the result of two powerful forces converging. The first and most direct cause was the launch of the 'National Participation Growth Fund' on the very same day. This government-backed fund is uniquely designed to attract retail investors, offering significant tax deductions and a structure where the government absorbs initial investment losses up to a certain limit. The start of its sales, with a total size of KRW 600 billion, created a massive wave of anticipated buying demand right as the market opened, pushing prices up sharply.
Adding to this domestic momentum was a wave of positive sentiment from global markets. Just a day earlier, U.S. tech stocks, led by NVIDIA, rallied strongly after earnings reports reaffirmed booming demand for AI technology. This 'risk-on' mood spilled over into Asia, encouraging investors in Korea to buy enthusiastically. In fact, the momentum was so strong that a similar buy-side sidecar had already been triggered on the main KOSPI market the previous day, setting the stage for the KOSDAQ to follow.
Looking at the broader context, this sidecar activation fits into a larger government narrative of a 'Financial Great Transformation' for 2026. Policies like the 'Value-up Program,' aimed at improving corporate governance and shareholder returns, and stricter enforcement against illegal short-selling have been gradually building investor confidence for months. These initiatives have made the market more sensitive to positive news, leading to more frequent, sharp upward movements that can trigger market stabilizers like the sidecar.
Ultimately, the sidecar was a market mechanism working as intended. It was a response to a perfect storm of a major government policy initiative aligning with strong retail demand and a favorable global tech rally. It highlights a market that is increasingly responsive to both domestic policy incentives and international trends.
- Sidecar: A temporary trading halt on program trading triggered by rapid price movements in the futures market. It acts as a circuit breaker to prevent market overheating and stabilize prices.
- Program Trading: The simultaneous purchase or sale of a basket of at least 15 stocks, often executed automatically by computers based on algorithms. It can have a significant impact on overall market prices.
- Value-up Program: A government-led initiative in South Korea encouraging listed companies to improve corporate governance, increase shareholder returns (through dividends and buybacks), and resolve the 'Korea Discount,' where Korean stocks are often undervalued compared to global peers.