As the KOSPI index has broken through 4,000, 5,000 and 6,000 points in quick succession, a tug-of-war is ongoing between investors expecting further gains and those predicting a short-term pullback. Some are using margin to make leveraged bets, while more are putting money into inverse products that profit when share prices fall.
Experts say the KOSPI still has room to rise, but advise caution against overextending in a highly volatile market.
According to Koscom ETF Check on the 1st, from Feb. 20 to 26, the No. 1 and No. 5 net purchases by individuals were "KODEX 200" (850.3 billion won) and "KODEX Leverage" (165.5 billion won). However, "KODEX 200 Futures Inverse 2X" (343.0 billion won) ranked No. 2, and "KODEX Inverse" (120.1 billion won) ranked No. 8. Even though the KOSPI has been rising day after day, many investors still doubt the peak and are betting on a decline.
Conversely, "debt-fueled investing" is also increasing. The balance of margin lending for stock trading climbed to a record high of 32.3684 trillion won on Feb. 26. The margin lending balance refers to the unpaid amount after investors borrow funds from securities firms to invest in stocks. It tends to grow when more investors expect share prices to rise.
The balance of stock lending transactions stood at 157.9298 trillion won as of the 26th of last month. It rose by more than 3 trillion won from the previous day. An increase in this balance means more investors expect share prices to fall.
The "KOSPI 200 volatility index" (VKOSPI) published daily by the Korea Exchange (KRX) is also soaring day after day. On Feb. 27, the V-KOSPI rose for a ninth straight session to 54.65. This index measures the market's expected volatility reflected in option prices and surges when the KOSPI tumbles. Generally, readings above 50 indicate high investor anxiety about volatility.
Cho Seung-bin, a researcher at Daishin Securities, said, "The recent rise in the KOSPI index is an upswing at a level unseen in our market's history, so investors are splitting into both extremes," adding, "Those chasing gains with late buying and those betting on a possible correction are coexisting."
Experts advise caution as market swings widen. Lee Bo-mi, head of the Capital Markets Research Office at the Korea Institute of Finance, said, "Both inverse and leveraged strategies should be used only within a level where investors can bear the volatility," adding, "If investors cannot withstand the volatility and drop out midway, they end up with losses and fail to capture the market's long-term uptrend."