By Yang Sung-jin
South Korea’s stock market has demonstrated the most volatility of any market worldwide this year, data showed on Monday.
Even aside from the turbulence sparked by the news of Kim Jong-il’s death, the financial industry’s data suggests that Korean investors rode a roller coaster ride this year, thanks to greater external uncertainties.
The eurozone sovereign debt crisis, the growing local derivatives market and heavy reliance of the Korean economy on trades added to volatility, brokerages said.
The average movement of the KOSPI, the main bourse run by the Korea Exchange, reached 1.23 percent on a daily basis, up from 0.73 percent last year.
The country’s volatility level is higher than many major markets including the U.S. (0.95 percent), Britain (1.01 percent), Japan (1.06 percent) and India (1.06 percent).
The greatest shock factor was concerns about a double dip that might hit the U.S. economy. In early August, the KOSPI was hovering at 2,170, but began to dive on the news that the U.S. economy was mired in a deeper slump than previously estimated. As of Aug. 9, the index plunged to 1,800 in just six trading sessions.
On Aug. 6, Standard & Poor’s decision to downgrade the credit rating for the U.S. also amplified the volatility of the Korean stock market, sending local investors seeking safe havens in other assets.
A panicky sentiment on the market hit a new level on Aug. 19, with the stock market plummeting 6.22 percent, or 115.7 points.
This year, 18 trading sessions including Monday’s moved by more than 3 percent, all of which happened since August. The gyration evoked the turmoil that followed the collapse of Lehman Brothers in 2008, and investors and analysts alike were fearful about whether the market would slip into a long-term bearish trend.
In mid-October, however, the local bourse staged a bear-market rally, lifting sentiment a tad higher, only to slump again on the greater risks coming from the eurozone market.
The sovereign debt crisis in Europe threatened to spread to bigger countries such as Italy, putting downward pressure on the stock market already beset by the slowing growth of the local economy.
Analysts said the domestic derivatives market, whose size is bigger than other major countries, is one of the key factors that increases volatility.
(insight@heraldcorp.com)