The domestic stock market has seesawed for two straight days amid U.S. President Donald Trump's erratic moves. As the so-called "TACO (Trump Always Chickens Out)" pattern repeats, with Trump abruptly shifting to talks right after signaling he would level Iranian power plants, market fatigue and volatility are rising in tandem.
Experts said the more Trump's "TACO" behavior repeats, the less impact it will have, and analyzed that whether the Strait of Hormuz reopens will most effectively ease the volatility-driven market.
According to the Korea Exchange (KRX) on the 24th, the "KOSPI200 volatility index" (VKOSPI), Korea's version of the fear gauge, closed at 62.80 on the 23rd, up 12.87%. It also jumped more than 5% intraday, marking a five-session winning streak.
The KOSPI index plunged more than 6% the previous day, but jumped more than 4% early in the session, swinging sharply over two days. The moves were largely driven by Trump, who over the weekend threatened to strike Iranian power plants if Iran did not reopen the Strait of Hormuz within 48 hours, then overnight said he would postpone such strikes for five days.
But with the drumbeats of war in the Middle East, crude prices, exchange rates, and interest rates are all whipsawing at the mercy of Trump's words, leading analysts to say Korea's stock market is now exposed to volatility at the limit.
Yoo Myung-gan, a researcher at Mirae Asset Securities, said, "With the Middle East war pushing up oil prices, the won-dollar exchange rate, and interest rates, the expense burden on corporations and individuals is increasing, which fundamentally hurts by raising the equity discount rate," adding, "The longer the war lasts, the more unavoidable the downside pressure on the stock market."
Experts expect the volatility-driven market to persist for the time being, but said the most important factor to curb the recently surging market volatility is whether the Strait of Hormuz reopens.
Park Sang-hyun, a researcher at iM Securities, said, "What matters (for market stabilization) is reopening the Strait of Hormuz through negotiations," adding, "It is hard to expect further declines in oil prices on 'TACO' alone, and the key is how to resolve Iran's blockade card over the Strait of Hormuz that it is wielding."
Some also say that in such a whipsawing market, it can be effective for investors to adopt a staggered buying strategy. They argue the medium- to long-term uptrend of the domestic market has not changed despite the war risk.
Kang Dae-seung, a researcher at SK Securities, said, "This month, volatility-control tools like sidecars and circuit breakers have been triggered multiple times, and the KOSPI200 volatility index remains elevated, which means near-term market anxiety has been maximized," but added, "It is premature to judge the current phase as a structural shift to a bear market."
Kang added, "Despite the uncertainty of war, earnings forecasts for listed corporations have been revised upward, and with accompanying price corrections, valuation burdens have eased," saying, "Rather than making a short-term call on market direction, a staggered buying strategy that takes advantage of the widening volatility while monitoring key risks is valid."