The Financial Commission has rebutted a Wall Street Journal (WSJ) report that labeled the Korean stock market as the 'world's craziest stock market,' stating that the domestic market is currently showing signs of stabilization. The commission noted that the KOSPI's rise this year ranks among the highest in major countries, and volatility has decreased from its peak.
On August 25, the Financial Commission distributed materials explaining the current state of the domestic stock market in response to WSJ's article titled 'The World’s Craziest Stock Market Has Turned Into a Fright Ride,' published on August 24.
In the article, WSJ described the Korean stock market, which surged last year due to the AI boom, as experiencing extreme volatility rarely seen in major markets in recent years. It pointed out that the KOSPI tripled in value since last year but then plummeted nearly 40% over six weeks in June and July, erasing about $2.5 trillion in market capitalization. Although the KOSPI has rebounded approximately 20% from its lows, the report indicated that high volatility persists.
WSJ specifically identified the introduction of single-stock leverage products in May as a contributing factor to the increased volatility. It noted that individual investors flocked to leverage products based on stocks like Samsung Electronics and SK Hynix, leading to expanded investment sizes and profits. The report also highlighted instances of investor losses and the growing participation of retail investors in the market.
In its rebuttal, the Financial Commission presented data on the KOSPI's performance and recent volatility indicators. As of August 25, the KOSPI has risen 60.0% this year. In comparison, the U.S. S&P 500 and Nasdaq increased by 11.8%, Japan's Nikkei 225 by 30.8%, the UK's FTSE 100 by 9.3%, and Taiwan's market by 56.0%. The commission explained that the Korean stock market has broken out of a prolonged trading range, achieving one of the highest growth rates among major countries this year.
While acknowledging that market volatility has increased due to various factors, including global semiconductor stock fluctuations since mid-June, the Financial Commission stated that volatility has begun to stabilize recently. It noted that trading volumes of single-stock leverage products have significantly decreased, indicating a cooling of market overheating.
The KOSPI 200 Volatility Index (V-KOSPI) rose from an average of 26.3 in the second half of last year to 85.4 in June of this year, reaching a record high of 96.9 on June 29. However, it has since dropped to 84.6 in July and 58.0 on August 21.
Following regulatory measures, trading volumes of single-stock leverage products have significantly declined. From May 27 to July 30, the average trading volume of these products was 11.7 trillion won, but it fell to 1.1 trillion won from July 31 to August 21 after the measures were implemented.
The Financial Commission stated, 'We will closely monitor the stock market situation and implement volatility reduction measures as needed, while consistently pursuing fundamental improvements to build a resilient capital market.'
* This article has been translated by AI.
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