[Gangnam Perspective] Between Investment and Speculation

March 2026 is likely to go down in the 70-year history of the Korean stock market as a period of unprecedented volatility. The Korea Composite Stock Price Index (KOSPI) swung by about 1,200 points, triggering 11 sidecar trading halts and three circuit breaker mechanisms that temporarily froze the market. For comparison, throughout all of last year there were only five sidecar activations and no circuit breaker mechanisms at all. On some days the index moved by more than 500 points, creating an extreme boom-and-bust environment rarely seen before.
The immediate driver of this wider trading range has been uncertainty over oil prices, interest rates, and exchange rates stemming from geopolitical risks in the Middle East. On the supply-and-demand side, a mix of factors has also shaken the market. One of the most notable is the Exchange-Traded Fund (ETF), which has deepened index concentration. Because ETFs can be traded like individual stocks, the market has grown to nearly 400 trillion won, giving them significant influence over the broader market. Basket trading, in which 10 or more stocks are bundled and traded at once, is the norm. As a result, buying just one share of an ETF can effectively mean purchasing dozens of underlying stocks, amplifying momentum in a rising market. Conversely, when the market turns weak, selling ETFs dumps multiple stocks at once, intensifying the shock to prices.
On top of this, retail investors have piled in with aggressive strategies using record-high margin financing, double-or-nothing bets through leveraged products, and inverse ETFs, further magnifying volatility. The current market capitalization of domestic leveraged and inverse exchange-traded products (ETPs) has exceeded 20 trillion won, a surge of more than 70% compared with the end of last year.
Since the start of the year, the KOSPI has risen more than 30%, drawing in a flood of money chasing short-term gains. But as the KOSPI turned into a roller coaster, individual investors were crushed by fear. With their composure exhausted, they dumped shares en masse. On the 4th, when the Korea Composite Stock Price Index (KOSPI) fell to the 5,000 level, trading value soared past 62 trillion won, the highest on record. Concerns over further declines led to a sharp increase in profit-taking and stop-loss selling. Yet the very next day, margin financing hit an all-time high of 33.6945 trillion won, marking a dramatic reversal in just one day. This is a textbook case of short-term trading driven by emotional swings. As investors rushed to recoup losses or buy the dip with borrowed money, margin-based investing exploded overnight, forcing securities firms that had reached their credit limits to shut off new margin loans one after another.
Turnover in KOSPI-listed stocks has also climbed steeply. It jumped from 0.86% in January to 1.65% in February, nearly doubling in a month. So far this month, more than 1.3 billion shares—over 2% of the total 63.9 billion listed shares—have changed hands on an average day. Considering that locked-up holdings such as those of major shareholders and treasury stock typically account for around 50% of total shares, this is no small volume. The surge in trading value and turnover amid heightened volatility, alongside the growth in margin financing and leveraged products, points to a rise in short-term trades aimed at a single big win. Ultra-short-term margin transactions have also increased, and the volume of forced sale of securities triggered by falling collateral ratios reached 82.4 billion won on the 6th. That is the highest level in two years and five months, since 548.7 billion won on October 24, 2023. The securities industry believes bold trading is continuing, especially among investors who jumped into the rally late or have suffered losses. However, such behavior is closer to speculation than investment.
Warren Buffett, often praised as the "Oracle of Omaha" and a "legendary investor," has long cited patience and a focus on a company’s intrinsic value as the key reasons for his success. His approach is grounded in cautious, long-term investing that does not chase fads or themes. By his philosophy, steadfast commitment to corporate value is investment, whereas impatience driven by FOMO—the fear of missing out—or by panic is speculation. Borrowed-money investing is even more vulnerable to the ticking clock and short-term price swings, and can easily lead to painful losses after expending a lot of effort for nothing.
By contrast, investors who hold the conviction that "even if stock prices swing wildly, value does not change" are less likely to be swept away by market turmoil. John Templeton, founder of Templeton Mutual Fund and a pioneer of value investing who became a legend on Wall Street, left this piece of wisdom during his lifetime: "Do not react immediately to market panic. The time to sell is before the crash, not after it. Instead, take a deep breath and quietly analyze your own portfolio." If you find yourself walking a tightrope between investment and speculation today, remember that sometimes "staying on the sidelines is also an investment."
winwin@fnnews.com Reporter