The benchmark Korea Composite Stock Price Index managed to close in gain on strong institutional buying Friday, after moving either side of the 1900-point mark in the wake of a stock crash in China.

Korean traders gave a sigh of relief after the KOSPI rose 13.29 points to 1,917.62, despite pessimistic expectations throughout morning trading. Trading volume was at 400.6 million shares worth 5.00 trillion won ($4.2 billion), with 454 firms falling and 360 gaining. 

The KOSPI opened at a four-month low of 1889.42, down 14.91 points from a day earlier. Throughout the day’s trading, the benchmark index recovered to rise above the 1900 threshold three times at 10:22, 10:27 and 12:21.

Foreign investors sold shares worth a net 255.4 billion won and retail investors 53.8 billion won. Institutional investors net bought 230.3 billion won of shares.

Market volatility was triggered by two crashes on China’s mainland exchanges this week, on Monday and Thursday. At the 11:30 a.m. break on Friday, the Shanghai Composite Index rose 2.4 percent, after falling as much as 2.2 percent in morning trading.

As Chinese authorities scrapped the controversial circuit breaker system from Friday, only after four days of enforcement, experts predicted slimmer chances of another crash of such magnitude.

Korean analysts said that the chances that China would undergo a third crash were slim, attributing Thursday’s second crash to China’s “premature” circuit breaker system. The Chinese circuit breaker only allows 10 percent fall for the first trading halt. Since gaining or losing additional 5 percent activates a second trading halt, the first trading half tends to drive investors into frantic selling mode, Korean analysts said.

“Another reason for weak trading in China is the rising skepticism on the Chinese economy and currency,” said Samsung Securities senior analyst Kim Yong-goo.

“To investors’ disappointment, China’s Central Economic Work Conference last month did not announce further stimulus plans, such as key rate cut or depreciating the renminbi currency,” he said. Kim and a number of analysts are expecting that Chinese government would notify of new economic stimulus plans around this weekend or next week.

Among large-cap shares, Samsung Electronics gained 0.69 percent, thanks to the fourth quarterly performance. Due to gloomy Chinese growth outlook, leading auto exporter Hyundai Motor dipped 0.73 percent and Kia Motors slipped 1.62 percent.

SK Hynix fell 1.66 percent and Samsung C&T retreated 0.7 percent. Samsung SDS gained 0.41 percent.

The local currency ended at 1,198.1 won against U.S. dollar, strengthening 2.5 won from the previous day.

By Chung Joo-won (joowonc@heraldcorp.com)