VKOSPI Slips to Mid-70s... Volatility Eases as Leveraged Positions Unwind

The 'fear gauge' VKOSPI, which indicates stock price volatility, soared to the 97-line at the end of June but has since plummeted to the mid-70s within a mere month, signaling a significant reduction in market anxiety. The VKOSPI, which tracks price changes in KOSPI200 futures options, appears to be entering a phase of settling volatility following a continued liquidation of leveraged products. The decline is attributed to a decrease in credit financing balances due to short selling, as well as reduced trading volume and assets for products linked to Samsung Electronics and SK Hynix following the tightening of regulations on leveraged Exchange Traded Funds (ETFs).

The KOSPI's 12-month forward Price-to-Earnings Ratio (PER) was found to be 5.1x, approaching a historic low. Goldman Sachs reaffirmed its 12-month target for the KOSPI at 2,000 this week. Goldman Sachs Chief Equity Strategist Timothy Moe stated that if volatility subsides, corporate fundamentals will once again demonstrate their strength.

Franklin Templeton Investments' Li Ping Liao Fund Manager noted that Samsung Electronics and SK Hynix are inexpensive and have solid earnings outlooks. Matthews International's Chief Investment Officer (CIO), Sean Taylor, mentioned that fundamentals are strong and recent earnings support this view.