As the KOSPI Composite Index Rides a Roller Coaster, the Fear Gauge Also Surges

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[Financial News] As the KOSPI Composite Index has continued to swing wildly this month, the KOSPI 200 Volatility Index, often called Korea's fear gauge, has climbed rapidly and come close to an all-time high.
\r\nOn the 14th, data from KRX showed that the KOSPI 200 Volatility Index closed at 76.16 the previous day, up 8.58% from the previous session. That was the second-highest level on record, after March 4, when it surged to an all-time high of 80.37 on the back of the Middle East war.
The KOSPI 200 Volatility Index measures expected market volatility reflected in options prices and typically rises when the KOSPI Composite Index falls sharply. When it rises during a rally, it is interpreted as a sign that investors are becoming more anxious about short-term overheating. A reading in the 20 to 30 range is generally considered stable, while anything above 50 is seen as an extreme fear zone.
The index has been rising sharply since the start of the year. In January, the daily average for the KOSPI 200 Volatility Index jumped to 34.50 from 27.63 in the previous month. It climbed further to 47.13 in February and 62.51 in March. Although it appeared to ease to 54.21 last month, it surged again to 64.20 this month.
The securities industry expects volatility to remain elevated for the time being. Lim Jeong-eun, a researcher at KB Securities, forecast that "short-term swings will widen amid major variables such as the outcome of the U.S.-China summit and the direction of Samsung Electronics' general strike negotiations, and the market will likely remain volatile."
Still, the broader view is that the KOSPI Composite Index will continue its upward trend. Han Ji-young, a researcher at KIWOOM Securities Co., Ltd., said, "There is no need to interpret greater volatility as a sign of weaker stock prices," adding, "As can be inferred from the several sharp rallies the market has experienced since this month, there have also been instances where upside volatility was triggered during the course of the market's advance."
She added, "The pace of the stock market's rise is the only concern. Given that the underlying drivers of the rally, such as earnings, valuations, and the broadening participation of individual investors, remain intact, it would be appropriate to maintain a strategy of increasing stock exposure, centered on semiconductor and other AI value chain stocks."
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jisseo@fnnews.com Seo Min-ji Reporter