"21 Trillion Won a Day"... Soaring Trading Volume Amid Volatile Stock Market
[Asia Economy Reporter Koh Hyung-kwang] This year, stock market trading volume has surged by nearly 50% compared to last year. This is attributed to the significant increase in stock market volatility due to the global spread of the novel coronavirus disease (COVID-19).
According to the Korea Exchange on the 16th, as of the 13th, the average daily trading volume of the domestic stock market, combining KOSPI and KOSDAQ, was 13.724 trillion KRW this year. This represents a 47.5% (4.425 trillion KRW) increase compared to last year's average daily trading volume of 9.299 trillion KRW. On the particularly volatile day of the 13th alone, 21.528 trillion KRW was traded.
The average daily trading volume had been gradually increasing, with 5.953 trillion KRW in 2014, 8.875 trillion KRW in 2015, 7.916 trillion KRW in 2016, 9.023 trillion KRW in 2017, and 11.474 trillion KRW in 2018. However, last year, amid the ongoing US-China trade dispute and additional trade friction with Japan, market investor sentiment weakened, causing the trading volume to fall below 10 trillion KRW and clearly breaking the upward trend.
However, the mood changed again this year. Trading volume has noticeably increased every month. It was 11.881 trillion KRW in January, 14.175 trillion KRW in February, and surged to 16.510 trillion KRW this month. This is the highest ever, surpassing the January 2018 trading volume of 15.810 trillion KRW when the KOSPI index hit its all-time high (2607.10).
The increase in KOSPI trading volume was relatively larger compared to KOSDAQ. The average daily trading volume of KOSPI this year was 7.421 trillion KRW, a 48.7% increase from last year's 4.990 trillion KRW. Looking at monthly figures, last year’s average daily trading volume stayed between 4 to 5 trillion KRW, but this year it rose from 6.435 trillion KRW in January to 7.583 trillion KRW in February, and reached the 9 trillion KRW level (9.073 trillion KRW) in March.
Notably, on the 12th and 13th, the trading volumes were 11.310 trillion KRW and 13.377 trillion KRW respectively, exceeding 10 trillion KRW for two consecutive days. The KOSPI daily trading volume surpassed 10 trillion KRW for the first time in about two years since January 31, 2018 (10.8426 trillion KRW), and exceeding 13 trillion KRW was the second highest ever since August 9, 2011 (13.5049 trillion KRW).
KOSDAQ trading volume also increased significantly, almost matching KOSPI. The average daily trading volume of KOSDAQ this year was 6.303 trillion KRW, a 46.2% increase from last year's 4.309 trillion KRW. Last month, KOSDAQ’s average daily trading volume reached 6.592 trillion KRW, narrowing the gap with KOSPI’s 7.583 trillion KRW to about 1 trillion KRW.
The increase in stock market trading volume is due to the frequent rollercoaster market conditions caused by the COVID-19 crisis, with the domestic stock market repeatedly rising and falling, leading to a surge in trading activity. This month, the KOSPI index showed fluctuations of over 2% on 6 out of 10 trading days, indicating heightened volatility. Kiwoom Securities researcher Seo Sang-young explained, "In volatile markets where the price rises one day and falls the next, stock trading becomes more frequent, increasing trading volume. However, if the market perceives the virus as a short-term shock factor, this phenomenon appears, but if the mid- to long-term outlook turns negative, investor sentiment weakens and trading volume may decrease."
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With active stock trading, the securities industry is also optimistic about improved brokerage commission profits and asset management (WM) division performance from the beginning of the year. Although it varies by securities firm, industry insiders say that the greater the stock proportion within the WM division, the more the increase in trading volume will positively impact performance. KB Securities researcher Lee Nam-sun said, "An increase in stock trading volume positively affects brokerage revenue for securities firms. However, the proportion of brokerage revenue within total revenue varies by firm."
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