KOSPI volatility rises… Could it swing on the ‘quadruple witching’ day? [Today’s market preview]

On the 12th, South Korean stocks are expected to see heightened volatility as they head into ‘quadruple witching,’ when futures and options expiries coincide. A mixed close on Wall Street overnight, along with a renewed rise in international crude prices, is also weighing on sentiment.

The KOSPI closed the previous session up 1.4% at 5,609.95. The index opened 126.13 points (2.28%) higher at 5,658.72 from the prior close, but pared gains in the afternoon as concerns related to the Iran war resurfaced. The KOSDAQ fell 0.85 points (0.07%).

Today is when stock index futures and options and single-stock futures and options all expire at the same time. Jeon Gyun, a researcher at Samsung Securities, said, “As the VKOSPI briefly rose above the 80 level, moves emerged to reduce allocations to risk assets, and foreign investors may roll over net short futures positions into the next contract month, meaning selling pressure in the futures market could persist.”

U.S. equities were mixed overnight. At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.61% from the previous session. The S&500 slipped 0.08%, while the Nasdaq Composite rose 0.08%. Despite February’s Consumer Price Index (CPI) coming in line with the Wall Street consensus and news that the International Energy Agency (IEA) would release a record volume of strategic petroleum reserves, stocks failed to extend gains.

Han Ji-young, a researcher at Kiwoom Securities, said, “Korean stocks are likely to see sector divergence, with the upside capped by changes in foreign investors’ cash-and-futures flows driven by the simultaneous futures-and-options expiration and by the news flow surrounding the Strait of Hormuz.” She added, “However, Middle East-related negatives have already been priced in sharply by the KOSPI compared with other markets, and the index appears to have formed a bottom around 5,050, the intraday low on last week’s plunge,” noting that “it is also worth watching that market leaders such as semiconductors, shipbuilding, defense and financials showed relatively solid price resilience in this selloff.”

Reporter Maeng Jin-gyu maeng@hankyung.com