ED Move to strengthen investor protection for more sound market
The price of a SK hynix share is posted in the dealing room of Hana Bank headquarters, Friday, as SK hynix is poised to begin trading on Nasdaq after raising $26.5 billion in American depositary receipt issuance. Yonhap
Korea's trade figures, growth forecast shadowed by volatile bourse
Amid the uncertainty and volatility seen on Korea's bourses, exports and trade balances managed to rise on chip-led growth, fueled by momentum in artificial intelligence (AI) investments.
This points to a mixed bag of healthy indexes stacked against what has been described as a "roller coaster" of volatility for both KOSPI and Kosdaq. It is vital to steady the bourses, which serve as a healthy venue for firms to raise capital and provide investors with a chance to grow their assets.
Korea's current account surplus in June ended in the black, posting a record $14.1 billion. It saw surpluses for 26 months straight, the third time such surpluses have extended since 2000, according to Bank of Korea figures announced Tuesday. Exports rose in June to $60.3 billion, a 2.3 percent increase over the same period in the previous year.
Samsung puts its second quarter sales tentatively at 171 trillion won ($113.6 billion), and announced an operating profit of 89.4 trillion won was announced on Tuesday, surpassing Nvidia's highest operating profit of around 82 trillion won.
Further, the International Monetary Fund has revised Korea's growth for the year upward from 1.9 percent to 2.6 percent.
However, the volatility of the benchmark KOSPI and secondary Kosdaq is overshadowing these developments. With the speed of the markets' growth in the past six months, there has been a high concentration of investment focused on tech giants Samsung Electronics and SK hynix, with much of the money moving into potentially mercurial exchange-traded funds (ETFs) linked to the two companies' shares.
A recent report from the capital markets and investments group CLSA showed that Samsung Electronics and SK hynix shares trading volume accounts for 51 percent of the Korean stock market, but when the 16 ETFs linked to the two shares are added, it would amount to around 70 percent of all transactions on the two bourses.
The Wall Street Journal has already warned of the danger that this erratic cycle could turn into a kind of "Squid Game." The KOSPSI 200 Volatility Index (VKOSPI), which serves as the market's "fear gauge," rose sharply in just over a month. The VKOSPI, which stood at 70.7 when the 14 leveraged ETFs and two inverse ETFs linked to Samsung and SK hynix began trading on May 27, shot to 93.8 by June 30, even higher than the 89.3 points it posted during the 2008 global financial crisis.
The time has come for greater measures to protect investors and safeguard market stability. It has been more than two weeks since Financial Supervisory Service Gov. Lee Chan-jin belatedly acknowledged that the ETFs tracking the two major chip giants should have been stopped.
Policymakers reportedly are reviewing how to strengthen the requirements for ETF investors, including raising the amount of deposit required for would-be investors and mandating more extensive training before people are allowed to invest.
The revitalization of the Korean stock market comes after years — even decades — of slow but steady growth. Policymakers and institutions should move quickly and precisely to improve the bourses' stability so that KOSPI and Kosdaq do not fall victim to dangerous, speculative investments.