June 6, Hana Infinity Seoul at Hana Bank’s headquarters in Jung-gu, Seoul. Reporter Oh Seung-hyun
Volatility in South Korea’s stock market has dropped sharply since financial regulators introduced supplementary measures for single-stock leveraged and inverse products. The KOSPI 200 Volatility Index (VKOSPI), known as “Korea’s fear gauge,” tumbled nearly 20% to touch the 60 range during trading — its first move below 70 in about three months, since May.
As of 1:45 p.m., the VKOSPI stood at 69.88, down 5.71 points, or 7.55%, from the previous session, the Korea Exchange (KRX) said. It briefly hit 69.87 during the day. That marks a decline of 16.30 points, or 18.91%, in just seven trading sessions from the 86.18 recorded on the 30th of last month, just before the leverage measures took effect. Given that the index had spiked to 93.27 intraday on the 29th of last month, the volatility gauge has fallen steeply since the measures were implemented.
The VKOSPI is an annualized measure of expected volatility over the next 30 days, as reflected in KOSPI 200 option prices. This was the first time the index dropped below 70 intraday since May 28. Earlier this year, the VKOSPI had hovered in the high 20-point range, but it surged as the KOSPI’s rally steepened. In mid-June, when the KOSPI topped 9,000, it reached the 80s and 90s. On June 29, it spiked to 97.99 intraday, a record high since the 2008 financial crisis.
Even when the sharp market rally reversed into a decline, the VKOSPI stayed elevated. Analysts attribute the extreme volatility to the launch of single-stock leveraged products tied to Samsung Electronics (005930.KS) and SK hynix (000660.KS) — two stocks that alone account for more than half of the KOSPI market’s total capitalization.
On the 31st of last month, regulators introduced supplementary measures to curb demand for the products, including raising the minimum deposit requirement to 30 million won in cash from 10 million won. As a result, single-stock leveraged trading volume plunged to 845.2 billion won on the 7th of this month from 12.45 trillion won on the 30th of last month.
Since the measures took effect, the KOSPI and KOSDAQ have risen 10.52% and 20.54%, respectively. On this day, the KOSPI opened up 47.56 points, or 0.76%, at 6,306.33 and was posting a modest gain of around 1%.
