The KOSPI reclaimed the 8,000 mark in a single day, recovering most of its losses after a circuit breaker triggered a plunge the previous day. The rebound is attributed to revived investor sentiment amid easing Middle East tensions and a recovery in US semiconductor stocks. However, the KOSPI 200 Volatility Index (VKOSPI), known as Korea's "fear index," hit a record high, surpassing its level during the global financial crisis and signaling continued volatility ahead.
According to the Korea Exchange Monday, the KOSPI closed at 8,096.93, up 612.52 points, or 8.18%, from the previous session, reclaiming the 8,000 mark. This marked the largest-ever point gain, exceeding the 606.64-point rise recorded on May 21. The KOSDAQ index also closed at 967.81, up 56.42 points, or 6.19%, from the previous day. The surge triggered sidecars, temporarily halting program buy orders, in both the KOSPI and KOSDAQ markets.
The VKOSPI rose 19.04% from the previous session to 91.23, surpassing the 89.30 level recorded during the October 2008 financial crisis to reach its highest level ever. This year's previous high was 83.58, recorded on March 5, shortly after the outbreak of war in the Middle East. Foreign investors sold a net 2.0035 trillion won, extending their net selling streak to 22 consecutive trading days, while individual investors also took profits, selling a net 618.3 billion won.
The market rebound was led by easing geopolitical risk in the Middle East and strength in US semiconductor stocks. Tensions eased somewhat after Iran and Israel signaled their intention to halt hostilities, and US President Donald Trump also calmed market unease by referring to expectations for progress in negotiations with Iran. In addition, a broad rally in US tech stocks on the New York market overnight stimulated buying.
In particular, large-cap semiconductor stocks, which had been at the center of the previous day's plunge, rebounded across the board, leading the index's recovery. Samsung Electronics and SK hynix, which had plunged 10.18% and 7.68% respectively on Sunday, both rebounded to close higher at 322,000 won (up 8.97%) and 2.215 million won (up 15.91%). SK hynix's 15.91% gain was its largest ever. Related stocks such as SK Square (up 13.51%) and Samsung Electro-Mechanics (up 18.39%) also posted sharp gains. The number of advancing stocks surged to 775 from 40 the previous day, while declining stocks numbered just 133.
Looking at past cases, the KOSPI has often rebounded after sharp declines. Since 2000, there have been a total of eight instances, including the previous day, in which the KOSPI fell more than 8% in a single day. Major causes cited include the bursting of the IT bubble, the September 11 attacks, the global financial crisis, the COVID-19 pandemic, concerns over the unwinding of yen carry trades, and fears of US-Iran military conflict.
Excluding the global financial crisis, most sharp selloffs recovered relatively quickly. The average KOSPI change 30 trading days after a decline of more than 8% was 7.39%. On March 19, 2020, when the KOSPI plunged 8.39% amid the spread of COVID-19, the index rose 32.32% from its low 30 trading days later. On March 4 this year, when the KOSPI plunged 12.06% amid fears of military conflict between the US and Iran, the index rebounded 19.59% by April 17, 30 trading days later.
Experts believe volatility could persist for some time ahead of major events such as US inflation data and the outcome of the Federal Open Market Committee (FOMC) meeting. "There are many short-term variables to monitor, including the US May inflation announcement, whether the Iran situation will end, the SpaceX listing, and the FOMC," said Byun Jun-ho, a researcher at IBK Investment & Securities. "However, as these concerns ease next week, the market is expected to seek a rebound."
