'Stock Market Gripped by 'Extreme Fear'... Volatility Index Also 'Soars'

Global markets are undergoing a correction amid debate over an artificial intelligence (AI) bubble, and the volatility index, known as the 'fear index,' is surging.

On the 19th, according to the Korea Exchange, the KOSPI200 volatility index (VKOSPI), known as Korea's fear index, closed at 39.51, up 0.25 points (0.64%). During the sharply falling morning session, the volatility index even spiked to 41.71. The KOSPI200 volatility index measures the market's expected volatility as reflected in option prices. It typically rises when the KOSPI plunges.

As concerns over a market correction grow, investor sentiment in the U.S. has also deteriorated sharply. The 'Fear and Greed Index' compiled by CNN has fallen to 11, remaining in the 'Extreme Fear' range. Just last week the index was at 32, corresponding to the 'Fear' range, but recent market declines have left investor sentiment frozen at an extreme.

Han Ji-young, a researcher at Kiwoom Securities, explained, "The Fear and Greed Index has entered the extreme fear zone as it recorded its lowest level since the tariff-shock-induced sell-off," adding, "When investor sentiment is weak, there is a strong tendency to interpret most factors negatively."

Markets are focusing on NVIDIA's results, to be released after the close of the New York session on the 19th. Wall Street expects NVIDIA's third-quarter earnings per share to be $1.28 and revenue to be $54,590,000,000. The market is focusing on various aspects including whether NVIDIA's third-quarter results and fourth-quarter guidance will beat expectations, the degree of improvement in gross profit margin (GPM), and whether it offsets the export ban on H20 semiconductors to China.

Suji Na, reporter suji@hankyung.com