Ants Defending Index Despite Soaring Fear Index

KOSPI 200 Volatility Index Records 17.82... Highest Since Late May
Individuals Buy Over 7 Trillion Won in KOSPI This Month... Recovering Above 3100 Level

[Asia Economy Reporter Song Hwajeong] As concerns over U.S. tapering (asset purchase reduction) continue, the domestic stock market has shown weakness for consecutive days, causing the fear index to soar. Despite the rising fear index, individual investors are maintaining their buying momentum, making every effort to defend the index.

According to the Korea Exchange on the 20th, the KOSPI 200 Volatility Index (VKOSPI), known as the fear index, rose 15.12% from the previous day to 17.82. This is the highest level since the end of May, indicating increased volatility in the domestic stock market. Recently, overlapping concerns such as tapering, economic peak-out, semiconductor industry slowdown, and the resurgence of COVID-19 (referred to as KOSPI19) have caused the KOSPI to fall below the 3100 level and the KOSDAQ below the 1000 level.

Kim Younghwan, a researcher at NH Investment & Securities, said, "The causes of the KOSPI correction can be seen as three factors: the peak-out of macro momentum, the spread of COVID-19, and concerns over early U.S. tapering." He added, "The ongoing debate about macro momentum peak-out appears to be an adjustment of expectations. Although the number of new COVID-19 cases has not decreased, the global increase in new cases and deaths has slowed since mid-August, which should somewhat alleviate fear."

Even amid the repeated weakness in the stock market, individual investors are actively buying to defend the index from falling. Thanks to individual buying momentum, the KOSPI started the day by recovering the 3100 level. As of 9:40 a.m., the KOSPI was at 3114.23, up 16.40 points (0.53%) from the previous day.

Since the beginning of this month, individuals have purchased over 7 trillion won worth of KOSPI stocks, absorbing sell orders from foreigners and institutions. In particular, they have heavily bought semiconductor stocks, which foreigners have been selling. This month, individuals have net purchased Samsung Electronics worth 5.3264 trillion won, the largest amount, followed by SK Hynix with 1.6902 trillion won. Market liquidity remains high, with standby funds exceeding 70 trillion won. According to the Korea Financial Investment Association, the average daily investor deposit this month was 70.0486 trillion won, up from 67.2561 trillion won last month.

Kim Yonggu, a researcher at Samsung Securities, analyzed, "The current KOSPI 12-month price-to-earnings ratio (PER) is 10.9 times, which is the fundamental rock bottom and below the 11.8 times at the end of 2019 before the COVID-19 pandemic. It also corresponds to a valuation level that completely ignores the virtuous cycle of domestic stock market fundamentals linking exports to corporate earnings since November 2020." He explained, "This is why the current market correction is seen as an extreme undershooting based on psychological and supply-demand overreactions rather than fundamentals." He added, "In the KOSPI range below the fundamental bottom of 3100, holding stocks rather than panic selling and strategic bargain buying rather than passive waiting are absolutely advantageous."

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