Rollercoaster Stock Market... Over 1% Up or Down Every Other Day

[Asia Economy Reporters Koh Hyung-kwang and Lee Min-ji] The domestic stock market is on a rollercoaster ride. Since the beginning of the year, the index has frequently experienced sharp fluctuations due to the impact of the novel coronavirus infection (Wuhan pneumonia). Analysts say that the volatility of the stock market has further increased due to the combined effects of the novel coronavirus, exchange rate volatility, and the earnings season.

According to the Korea Exchange on the 6th, out of the 20 trading days in the KOSPI market last month, there were 9 trading days when the index recorded a fluctuation rate of more than 1%. This means that the index rose or fell by more than 1% roughly every other day.

By month, this is the highest number of occurrences since October 2018, known as the "Black October," when the market plunged due to concerns over the US-China trade conflict. At that time, out of 21 trading days, 10 days showed fluctuations of more than 1%.

In the case of last year, out of a total of 246 trading days, the KOSPI index recorded fluctuations of more than 1% on 51 trading days (20.7%). On average, the index fluctuated by more than 1% once every five trading days. The months with the most days of more than 1% movement were January and November, each with 6 days. July and August of last year, when Japan's trade retaliation intensified and the index fell below 1900, had only 5 trading days each with fluctuations over 1%. Additionally, April, May, October, and December each had 4 days, June and September had 3 days each, and March had only 2 trading days with fluctuations exceeding 1%.

In particular, since the first confirmed case of the novel coronavirus was announced on the 20th of last month, more than half of the 10 trading days until the previous day?6 trading days?showed fluctuations of more than 1%. This indicates that market volatility has increased significantly.

On the 28th of last month, when the fear of the novel coronavirus engulfed the market, the KOSPI plunged more than 3%, falling below the 2180 level. This was the largest drop in about 1 year and 3 months since October 11, 2018 (-4.4%).

During the four trading days from the 28th to the 31st of last week (the 27th was a holiday), except for the 29th (0.39%), the KOSPI showed fluctuations of more than 1% for three consecutive days, falling 5.6% compared to the previous week. This was the largest weekly decline since the 5.9% drop during the week of October 22 to October 26, 2018. Then, on the 4th, the index rebounded nearly 2% as foreign investors bought shares, recovering to the 2150 level.

The KOSDAQ's volatility is even more severe. Out of 20 trading days in January, there were 11 days with fluctuations of more than 1%. Among these, there were 3 days with fluctuations exceeding 2%, and 3 days with fluctuations exceeding 3%.

The sharp fluctuations in the stock market are attributed to a combination of factors: the earnings season at the beginning of the year coinciding with the novel coronavirus outbreak, which triggered anxiety, and the expansion of exchange rate volatility. Researcher Kim Yong-gu from Hana Financial Investment explained, "At the beginning of the year, the index rose significantly due to expectations of a semiconductor market recovery, but since the end of last month, the impact of the novel coronavirus has increased the index's decline, sustaining volatility. Additionally, as the infection spreads, exchange rate volatility has also increased, affecting the stock market."

Experts predict that the increased volatility in the domestic stock market due to the novel coronavirus will continue for the time being. Researcher Roh Dong-gil from NH Investment & Securities said, "Compared to past cases of Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS), it seems that the usual level of fear regarding the disease has been reflected. However, since we are at the early stage of the novel coronavirus impact, increased volatility seems inevitable for the time being."

Researcher Kim Hak-gyun from Shin Young Securities also said, "I believe the primary shock to the stock market related to the novel coronavirus was sufficiently reflected during the adjustment period from late January to early February. Going forward, volatility is expected to increase day by day depending on the news flow."

This content was produced with the assistance of AI translation services.