By Yoon Ja-young
Seoul shares traded relatively stable on Monday, the first day stocks were allowed to move up and down within a 30 percent band from their previous closing prices.
The Korea Exchange (KRX), which operates the country’s bourses, has doubled the daily stock movement limit from 15 percent.
Some stock investors feared that the expansion would damage them with higher volatility risks, but the market appeared more stable than had been feared.
The main index KOSPI closed at 2,042.32, Monday, down 9.85 points from the previous trading day last Friday. The tech-loaded KOSDAQ closed at 705.85, losing 6.55 points.
Analysts say that the expansion of the daily limit doesn’t necessarily increase the fluctuation in the stock market.
“The expansion of the daily price band means that both opportunities for profit and risks for losses will increase as much. As investors face the daily changes they haven’t experienced previously, they will have to make quick decisions,” said Kim Hyo-jin, an analyst at Kyobo Securities.
Investors are advised to focus on fundamentals of the shares, especially in case of the small stocks.
“The stock prices will more quickly reflect the corporate value,” she said.
She advised investors to make rational decisions based on criteria, such as news and filing, data and analysts’ reports rather than chasing stocks on market rumors.
According to Kyobo Securities, the developed countries without a daily stock price movement limit had average stock prices fluctuate by 16.85 percent annually. Their annual fluctuation was 4.8 percentage points lower than the developed markets with limits on daily stock price movement.
In emerging markets, countries that allowed stock prices to move freely had a fluctuation of 20.15 percent, which is 2.45 percentage points lower than countries with a daily limit.
Some shares rose to the daily limit. Among them are Taeyang Metal Industrial, Jeju Semiconductor and Creative Power Plant, Samyang Holdings, GT&T, Daeho PNC and Keyang Electric Machinery.
However, there was no stock that fell to the daily limit of 30 percent, though eight companies saw their share price fall more than the previous daily limit of 15 percent.