"Did I Miss My Chance to Strike It Rich Without Samsung and SK Hynix?"... The Real Reason Behind the Soaring KOSPI Fear Index

FOMO Sentiment Sweeps the Market

Debt-Fueled Investments Surge in Samsung Electronics and SK hynix

Time to Focus on Volatility Management

Driven by the artificial intelligence (AI) and semiconductor cycle, the domestic stock market continues its strong upward trend, while the KOSPI 200 Volatility Index (VKOSPI), known as the "Korean Fear Index," is surging.

On the 27th, the status board in the dealing room of Hana Bank in Jung-gu, Seoul, displays the KOSPI, Samsung Electronics, and SK hynix stock prices. As of 9:02 a.m. that day, the KOSPI was at 8,447.69, up 400.18 points (4.97%) compared to the previous day. Yonhap News

According to the Korea Exchange on May 28, the VKOSPI closed at 70.78, up 3.95% from the previous day. The VKOSPI even soared as high as 82.23 at one point on the 18th. A level of 20 is considered average, above 30 is high volatility, and above 40 signifies a fear zone.

Korea Investment & Securities recently noted that an unusual phenomenon is being observed in the domestic stock market, with both the stock index and the volatility index surging simultaneously. The VKOSPI, which indicates the expected volatility of the stock index over the next 30 days, typically moves inversely to the stock index, as investors rush to buy put options to hedge against downside risk during market downturns.

However, during the recent sharp rise in the KOSPI, the VKOSPI also climbed. This appears to be driven by FOMO (Fear of Missing Out)—the fear of not participating in the market's upward momentum, rather than the fear of a downturn. This can be explained by a combination of aggressive out-of-the-money call option buying, betting on further gains, and hedging by short sellers whose positions entered loss territory due to the unexpected surge.

The FOMO that has shaken up the options market is clearly reflected in the spot stock market, where individual investors are chasing the rally and driving a borrowing-to-invest ("bit-too") boom. Since the beginning of this year, individual investors have made a net purchase of 54.5642 trillion won in the KOSPI market. In May alone, they scooped up 32.8852 trillion won, pushing the market to new highs. Instead of taking profits during the price rally, funds continue to flow in as investors chase rising prices.

According to the Korea Financial Investment Association, the balance of margin loans stood at 36.3555 trillion won as of May 22. This is a 32.6% increase (27.4207 trillion won) compared to the beginning of the year. The margin loan balance refers to the amount investors have borrowed from securities firms for stock investment that has not yet been repaid; a higher balance indicates increased leverage.

In particular, margin trading funds are pouring into Samsung Electronics and SK hynix. The margin loan balance for Samsung Electronics surpassed 4 trillion won for the first time on the 20th and stood at 4.1884 trillion won as of the 26th. SK hynix's margin loan balance was also tallied at 3.3454 trillion won. Compared to the beginning of the year, these represent increases of approximately 2.4 times and 3.4 times, respectively.

Jung Hyeonjong, a researcher at Korea Investment & Securities, said, "A highly volatile environment means the domestic stock market can be exposed to tail risk at any time—those low-probability but potentially market-shaking events. It is time to be mindful of portfolio concentration risks and to consider proper volatility management."

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