[Edaily Reporter Kim Kyeo-Re ] Bloomberg reported on the 9th that stock market volatility is subsiding as the unwinding of South Korea’s leveraged positions enters its final stages.

Bloomberg reported that the KOSPI 200 Volatility Index (VKOSPI), which reflects market anxiety in the domestic stock market, has fallen to its lowest level in two months since hitting a record high of 97.99 in June. The VKOSPI remained above the 90 mark until the end of last month but has since fallen to the mid-70s this month.
Bloomberg cited the decline in margin loan balances resulting from short selling and the financial authorities’ tightening of regulations on leveraged exchange-traded funds (ETFs) as the main causes of the reduced market volatility. With trading volume and asset sizes of financial products linked to leading semiconductor stocks—Samsung Electronics and SK Hynix—declining across the board, analysts assess that the leverage-driven overheating that had fueled market anxiety has largely subsided. The KOSPI’s 12-month forward price-to-earnings ratio (P/E ratio) has fallen to a record low of 5.1 times.
However, global asset management firms are still in no hurry to return to the Korean market. Although volatility in the Korean stock market has declined from its peak, it remains at a high level; analysts note that while global investors recognize the market’s historically low valuation and solid earnings outlook, they are still weighing the risk of further sharp fluctuations.
Yi-Ping Liao, a fund manager at Templeton Global Investments, said, “It is clear that the stock prices of Samsung Electronics and SK Hynix are cheap and their earnings outlook is favorable,” but added, “Due to the extreme market volatility seen recently, investors have no choice but to adopt a cautious stance in the short term.”
Maxence Biso, Chief Investment Officer at Arkevium Capital, noted, “There are signs that capital is beginning to shift from domestic retail investors to foreign institutional investors,” adding, “Foreign portfolio managers need evidence that the market’s pricing mechanism is functioning normally again.”
Some experts are also forecasting a rise in the KOSPI index. Timothy Mo, Chief Equity Strategist for Asia-Pacific at Goldman Sachs, stated, “Once volatility subsides, underlying fundamentals will regain importance,” adding, “We believe the KOSPI is very attractive.” He set a target price of 12,000 for the KOSPI index, seeing a 90% upside potential.
Sean Taylor, Chief Investment Officer at Matthews International Capital Management, also commented, “We view the KOSPI’s fundamentals as very solid, and recent earnings support this,” but noted, “We are taking a wait-and-see approach as the market’s leveraged positions appear somewhat overheated.”