Korea's stock market has swung for a second straight day amid President Donald Trump's capricious moves. As the so-called "TACO (Trump Always Chickens Out)" pattern repeats—pivoting to talks right after signaling the obliteration of Iranian power plants—market fatigue and volatility are rising together.
Experts said the more President Trump's "TACO" behavior repeats, the more its impact will gradually diminish, adding that whether the Strait of Hormuz is opened would most effectively ease the volatile market conditions.
According to the Korea Exchange (KRX) on the 24th, the Korea-style fear gauge, the "KOSPI200 Volatility Index" (VKOSPI), closed at 62.80 on the 23rd, up 12.87%. It rose more than 5% intraday on the day as well, marking a five-session winning streak.
The KOSPI index plunged more than 6% the previous day but jumped more than 4% early on the day, swinging sharply over two days. The move was largely driven by President Trump's remarks over the weekend that he would attack Iranian power plants within 48 hours if Iran did not open the Strait of Hormuz, followed overnight by a stance to delay the plant attack for five days.
However, with the drumbeat of war in the Middle East, key macro indicators such as oil prices, exchange rates, and interest rates are gyrating at the flick of Trump's "mouth," leading to an assessment that the exposure of Korea's stock market to volatility has reached its 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 burdens on corporations and individuals are increasing, which fundamentally has a negative impact by raising the equity discount rate," adding, "The longer the war lasts, the more unavoidable the exposure to downside pressure in the stock market becomes."
While experts expect the volatile market to persist for the time being, they also said that whether the Strait of Hormuz is opened is the most important factor in reducing the recently surging market volatility.
Park Sang-hyun, a researcher at iM Securities, said, "What matters (for market stability) is to open the Strait of Hormuz through negotiations," adding, "It is hard to expect further declines in oil prices with only 'TACO,' and the key is how to resolve the Strait of Hormuz blockade card that Iran is wielding."
There is also an opinion that in such whipsaw conditions, it may be effective for investors to adopt a partitioning buying strategy. The reason is that the medium- to long-term uptrend of the domestic stock market has not changed amid war risks.
Kang Dae-seung, a researcher at SK Securities, said, "This month, volatility-dampening devices such as sidecars and circuit breakers were triggered multiple times, and the KOSPI200 Volatility Index remains at a high level, which means short-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 went on to say, "Despite the uncertainty of war, earnings forecasts for corporations on the Korea Exchange have been revised upward, and with price corrections accompanying that, valuation burdens have eased," adding, "Rather than concluding the market's direction in the short term, a partitioning buying strategy that leverages the phase of expanding volatility while monitoring key risks is valid."