Kospi Swings Turn More Volatile Than During March US-Iran War

June volatility index hits a record 73.4

Concentration in market leaders deepens

The Kospi's average daily volatility has surpassed the level seen in March, when war broke out between the US and Iran. The move reflects heavier concentration in semiconductor shares and a short-term influx of money into the stock market following Nvidia Chief Executive Officer Jensen Huang's visit to South Korea.

The Korea Exchange said the VKOSPI, known as South Korea's version of the fear gauge, stood at 73.44 on June 5. The index tracks expected market volatility implied by options prices and typically rises when the Kospi tumbles. After starting the year at 30, it jumped to 61.48 in March on the impact of the US-Iran war. It then climbed above 70 last month, far exceeding the monthly average of 47.44 recorded in March 2020 during the Covid-19 pandemic.

Recent volatility has intensified after Samsung Electronics Co. and SK Hynix Inc. grew to account for more than 50% of the main board's market capitalization and single-stock leveraged products tied to the shares were launched on May 27. On June 5, the KOSPI market triggered a sell-side sidecar, a temporary suspension of sell quotes for program trading. A buy-side sidecar was triggered on June 1, underscoring the recent roller-coaster trading.

The global macro backdrop has added to concerns, with central banks around the world either holding interest rates steady or raising them. Indonesia and Sri Lanka previously lifted benchmark rates by 0.5 percentage point and 1 percentage point, respectively, in response to inflation pressure. The Bank of Japan has also signaled it may raise rates at its monetary policy meeting on June 15-16. Securities firms are advising investors to use the volatility to look for buying opportunities at lower prices.

Lee Jae-won, an analyst at Yuanta Securities, said profit-taking followed Broadcom's earnings release, but the move reflected disappointment with the results rather than a slowdown in AI demand. He added that instead of moving away from market leaders, investors should seek bargain-buying opportunities in information-technology stocks, where profit-taking is expected to emerge.

Cho Ara, Hankyung.com reporter rrang123@hankyung.com