SEOUL, Feb 25 (AJP) - It took the KOSPI three months to climb from 4,000 to 5,000 — and less than a month to zoom past 6,000.
On Wednesday, the index closed at a record 6,083.86, capping one of the fastest rallies in its history. The jump is striking for a market that once waited more than a decade to reach each new four-digit milestone: 1,000 in 1989, 2,000 in 2007 and 3,000 in 2021.
The index finally broke above the 4,000 on Oct. 17, and then landed above 5,000 on Jan. 27. The next 1,000-point rise was a breeze. How fast the record will be broken will be a riskier and costlier bet.
Behind the rally lies an enormous pool of dry powder.
As of Tuesday, investor deposits totaled 107.9 trillion won, the third-highest level on record. Money Market Funds stood at an all-time high of 235 trillion won, signaling strong institutional liquidity.
But the higher the stakes, the greater the risk.
The KOSPI Volatility Index (VKOSPI) rose to 49.48 on Wednesday, up more than 60 percent from the start of the year. Although below this year’s peak, the increase is unusually sharp — especially compared with the modest rise seen throughout 2025.
Short-selling activity is also building. According to the Korea Financial Investment Association, outstanding stock lending balances reached about 153 trillion won as of Feb. 24, up nearly 40 trillion won since the start of the year. Such growth is often seen as a precursor to expanded short-selling.
Rising lending balances suggest that more investors are positioning for potential declines after the recent surge.
Leverage is another source of concern.
Outstanding credit loans stood at about 32 trillion won as of Feb. 24. Investors using borrowed funds tend to focus on short-term trading, making markets more vulnerable to sudden sell-offs.
If volatility triggers margin calls, forced liquidations could accelerate losses and amplify swings.
“Investors’ risk appetite has increased significantly, leading to a surge in credit loan balances,” said Park Seok-hyun, an analyst at Woori Bank. “This could exacerbate market volatility.”
Reflecting these risks, several brokerage firms have tightened or suspended stock-backed lending since early February.
Valuation is also under scrutiny.
The KOSPI’s price-to-book ratio is estimated at around 2 — high by historical standards — while return on equity has only recently reached the 9 to 10 percent range. Critics argue that this gap suggests stretched pricing.
“The only other times the PBR approached this level were during the IT bubble and before the global financial crisis,” said Heo Jae-hwan, an analyst at Eugene Securities.
The index’s PBR peaked at 1.87 in November 2007, shortly before the subprime mortgage crisis triggered a sharp collapse.
Still, Heo downplayed the risk of a crisis-scale downturn.
“The domestic market is finally shedding its long-standing undervaluation,” he said. “This is a turning point rather than a bubble.”
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