South Korea’s VKOSPI Falls Below 40, Lowest in About Six Months

South Korea’s VKOSPI, a volatility index that tracks investor anxiety in the domestic stock market, fell below 40 intraday to its lowest level in about six months.

The VKOSPI stood at 39.32 as of 1:56 p.m. on Sept. 4, down 3.10 points, or 7.31%, from the previous session, according to the Korea Exchange. It was the first time the index had dropped below 40 during trading since Feb. 12, when it hit 39.13.

The VKOSPI is calculated from Kospi 200 options prices and reflects the market’s annualized expectation for volatility over the next 30 days. Since 2010, it has typically traded around 20, but it has remained unusually elevated this year as stock-market volatility widened sharply.

The VKOSPI’s monthly average rose to 68.78 in May, when the Kospi first climbed above 7,000 on gains in artificial intelligence and semiconductor shares. After the Kospi broke through 8,000 on May 15 and moved above 9,000 on June 18, the VKOSPI soared to an intraday high of 97.99 on June 29.

At the time, buying was concentrated in heavyweight chipmakers including Samsung Electronics and SK Hynix. Trading also surged in single-stock leveraged and inverse products tied to those shares, adding to market volatility. Semiconductor stocks later came under pressure, and the Kospi fell more than 20% in July, but the VKOSPI stayed above 80 for a while.

The volatility index began falling in earnest after financial authorities tightened regulations in late July on single-stock leveraged and inverse products. Regulators raised the minimum margin deposit for high-risk single-stock derivatives to 30 million won from 10 million won, and tightened rules so proceeds from stock sales count as margin collateral only from the T+2 settlement date.

Daily trading value in single-stock leveraged and inverse products accordingly dropped from 19.4429 trillion won on June 24 to around 500 billion won at the end of last month.

The easing of the sharp correction in semiconductor shares and the emergence of sector rotation also helped calm volatility, the report said. External uncertainty remains, including military tensions between the US and Iran and rising global bond yields. Still, share buybacks by Samsung Electronics and SK Hynix have helped support the market, while other corporations have continued net purchases of about 1 trillion won a day.

At the same time, the Kospi rose 1.89% to 6,703.65, while the Kosdaq gained 3.13% to 814.93.