VKOSPI falls below the 40 mark for the first time in half a year... Volatility plummets

(Seoul = Yonhap News) Reporter Hwang Cheol-hwan = The KOSPI 200 Volatility Index (VKOSPI), known as the 'Korean-style fear index', fell below the 40 mark during intraday trading on the 4th, showing the lowest level in more than half a year.

According to the Korea Exchange, as of 1:56 p.m. on this day, VKOSPI was at 39.32, a sharp drop of 3.10 points (7.31%) from the previous day.

This is the first time in over 6 months that VKOSPI has fallen below the 40 mark during the day since February 12th of this year (the intraday low was 39.13).

The average value of VKOSPI since 2010, which is an annualized indicator of the expected volatility over the next 30 days reflected in KOSPI 200 option prices, has been around 20.

However, it began to rise rapidly from the beginning of this year and soared to an average of 68.78 in May, when the KOSPI surpassed the 7,000 mark for the first time in history thanks to the super strength of the global semiconductor industry.

Afterwards, on the 15th of the same month, the index exceeded the 8,000 mark, and on June 18, it reached the '9,000 pi' (KOSPI 9,000) level, showing the VKOSPI soaring to 97.99 during the day (June 29).

The main causes are extreme investment overheating, extreme market concentration with Samsung Electronics [005930] and SK Hynix [000660] accounting for more than half of the stock market capitalization, and amplification of volatility due to the launch of single-stock leverage and inverse products that use the two stocks as underlying assets.

Afterwards, as the global semiconductor adjustment began, KOSPI fell by more than 20% in July alone, but VKOSPI continued its high march above the 80 level and began to fall sharply only after financial authorities implemented complementary measures for single-stock leverage and inverse products at the end of July.

The authorities increased the basic deposit for single-item leveraged and inverse products from 10 million won to 30 million won, and allowed the sale price to be recognized as a deposit on the day (T+2) when actual settlement is completed and cash is deposited.

Accordingly, the daily trading value of single-stock leveraged and inverse products, which once increased to 19.4429 trillion won on June 24, decreased to around 500 billion won at the end of last month.

The global semiconductor adjustment is nearing completion and the emergence of circular selling may have had an impact on easing domestic stock market volatility.

Despite a series of negative news, such as the renewed armed conflict between the United States and Iran and a sharp rise in government bond interest rates in major countries, the situation in which other corporations continue to make net purchases of 1 trillion won every day due to the share purchases of Samsung Electronics and SK Hynix, firmly supporting the bottom of the domestic stock market is also mentioned as a background.

Meanwhile, as of this time, KOSPI is showing 6,703.65, up 1.89% from the previous level. KOSDAQ rose 3.13% to 814.93.