VKOSPI Falls Below 40, Hitting Lowest Level in About Six Months

South Korea’s VKOSPI, the Kospi 200 volatility index that gauges investor anxiety, fell below 40 during trading, reaching its lowest level in about six months.

The index stood at 39.32 as of 1:56 p.m. on September 4, down 3.10 points, or 7.31%, from the previous session, according to the Korea Exchange. It was the first time the gauge had dropped below 40 intraday since February 12, when it touched 39.13.

The VKOSPI is calculated from Kospi 200 options prices and reflects the market’s annualized expectation for volatility over the next 30 days. Since 2010, it has typically traded around 20, but it has remained unusually elevated this year as stock-market volatility surged.

The VKOSPI’s monthly average rose to 68.78 in May, when the Kospi first moved above 7,000 on gains in artificial intelligence and semiconductor shares. The index later climbed as high as 97.99 intraday on June 29 after the Kospi broke above 8,000 on May 15 and entered the 9,000 level on June 18.

At the time, buying was concentrated in heavyweight semiconductor stocks including Samsung Electronics and SK Hynix. Trading in single-stock leveraged and inverse products tied to those names also surged, amplifying market swings. Semiconductor shares later came under pressure, and the Kospi fell more than 20% in July, while the VKOSPI stayed above 80 for a period.

The volatility gauge began falling in earnest after financial authorities tightened regulations in late July on single-stock leveraged and inverse products. Regulators raised the minimum margin deposit for high-risk single-stock derivatives to 30 million won from 10 million won. They also tightened the rules so proceeds from stock sales would count toward deposits only from the T+2 settlement date, when payment is completed.

Daily trading value in single-stock leveraged and inverse products dropped to around 500 billion won by the end of August from 19.4429 trillion won on June 24.

The easing of the sharp correction in semiconductor stocks and the emergence of sector rotation also helped calm volatility, the report said. External uncertainties, including military tensions between the US and Iran and rising global government bond yields, have persisted. Even so, share buybacks by Samsung Electronics and SK Hynix, along with net buying of about 1 trillion won a day by other corporations, have helped support the market’s floor.

At the same time, the Kospi rose 1.89% to 6,703.65, while the Kosdaq gained 3.13% to 814.93.