Since June, the KOSPI's average daily swing has grown larger than in March, right after the Iran war broke out. Observers said extreme concentration in Samsung Electronics and SK hynix is amplifying volatility.
According to the financial investment industry on the 7th, from the 1st to the 5th of this month, the KOSPI's average daily volatility was 3.9%. Volatility refers to the ratio of the intraday range between the KOSPI's high and low.
That exceeded March's average daily volatility of 3.7% when the Iran war broke out. It is also well above the full-year daily average of 3.0%. When the KOSPI plunged intraday on the 5th, the one-day volatility surged to 4.0%.
It has been extremely rare since 1990 for the KOSPI's average daily volatility to top 4.0%. The only periods were November 1997 to February 1998 during the foreign exchange crisis (5.7%), June to November 2000 during the dot-com bubble burst (4.6%), October to December 2008 during the global financial crisis (7.4%), and March to April 2020 during the COVID-19 pandemic (4.9%).
Concentration in Samsung Electronics and SK hynix is cited as the reason for the higher KOSPI average daily volatility. As of the 1st, the two stocks made up 53.35% of the KOSPI's market capitalization, more than half. Samsung Electronics accounted for 29.23% and SK hynix 24.12%. On the 27th of last month, single-stock leveraged products based on the two stocks were launched, further expanding volatility, according to analyses.
The problem is that the global macroeconomic environment is not entirely favorable. The war has sent international oil prices soaring, pushing up inflation and prompting central banks in various countries to hold or raise benchmark interest rates.
Recently, Indonesia and Sri Lanka raised rates by 0.5 percentage point and 1 percentage point, respectively, and the Bank of Japan signaled it may raise rates at its monetary policy meeting on June 15–16. The U.S. Federal Reserve (Fed) will hold the Federal Open Market Committee (FOMC) on June 16–17.
Even so, brokerages assess that the KOSPI earnings momentum remains intact. Han Ji-young, a researcher at Kiwoom Securities, said of past cases when volatility topped 4.0%, "All were downside volatility that occurred during market plunges caused by major crises, whereas this time it is upside volatility occurring in a bull market, which is unusual."
They added, "The KOSPI earnings momentum centered on semiconductors and the low valuation burden are ongoing," noting, "Given that the market often narrows losses toward the close (intraday), the resilience of leading stocks remains solid even in this high-volatility phase, which is a source of relief."