VKOSPI Drops Below 40, Hitting Six-Month Low

The KOSPI 200 Volatility Index (VKOSPI), also known as the "Korean fear index," has fallen to its lowest level in about half a year.

According to the Korea Exchange on September 4, the VKOSPI closed at 39.33, plunging 3.09 points (7.28%) from the previous session. The intraday low was 39.30. This is the first time in about six months that the VKOSPI has dropped below the 40 level during trading hours, since February 12, when it reached an intraday low of 39.13.

The average VKOSPI since 2010—an annualized index reflecting the expected 30-day volatility from KOSPI 200 option prices—has been around 20. However, the index surged sharply early this year, climbing to an average of 68.78 in May when the KOSPI broke through the 7,000 level for the first time in history. Afterwards, as the index surpassed 8,000 and even reached the "9,000-point" milestone on June 18, the VKOSPI soared to an intraday high of 97.99 on June 29.

The main factors cited include extreme investment overheating, a strong market tilt toward Samsung Electronics and SK hynix, and amplified volatility caused by the launch of single-stock leveraged and inverse products based on these two stocks.

Although the KOSPI plunged more than 20% in July alone due to the global semiconductor correction, the VKOSPI stayed above the 80 level for some time. It was only after the financial authorities implemented supplementary measures for single-stock leveraged and inverse products at the end of July that volatility began to subside. The authorities raised the minimum margin for these products from 10 million won to 30 million won and changed the recognition date for margin deposits from the day of the sell order to the settlement completion date (T+2). As a result, the daily trading volume, which had reached 19.4429 trillion won on June 24, shrank dramatically to around 500 billion won by the end of last month.

The end of the global semiconductor correction and a shift to a rotational market also appear to have contributed to easing volatility. Even amid adverse conditions such as heightened geopolitical risk and surging interest rates, large-scale share buybacks by Samsung Electronics and SK hynix led other corporations to make daily net purchases of over 1 trillion won, providing support for stock prices. This is also cited as a key factor.

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