South Korea to closely watch risks around stock market volatility

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SEOUL, July 8 : South Korea's finance minister agreed on Wednesday with other economic policymakers to closely monitor risk factors that could heighten stock market volatility, the ministry said.

Stock market volatility has risen amid foreign and institutional profit-taking, portfolio rebalancing and shifting expectations for the global AI sector, the ministry said in a statement after Minister Koo Yun-cheol met with the central bank governor and the heads of financial regulators.

The KOSPI fell as much as 4 per cent in early trade to its lowest level since May 20, before erasing losses to turn higher on a rebound in chipmaker stocks. The index was up 0.5 per cent as of 0052 GMT but was still down 15.6 per cent from the record peak hit on June 22.

Earlier this week, the index triggered a circuit breaker for the sixth time this year, and the 12th in history, as sharp swings in heavyweight chip stocks such as Samsung Electronics and SK Hynix fuelled heightened market volatility.

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"Increasing concentration in the semiconductor sector has become a factor raising financial market volatility, with the impact of fluctuations in the chip sector on the whole stock market growing," the ministry said, following a series of warnings from regulators.

The Financial Supervisory Service said on Tuesday that it would monitor the market impact of recently-introduced single-stock leveraged exchange traded funds (ETFs) linked to chipmaker stocks and review marketing practices by asset management firms if needed.

The Bank of Korea said on Sunday it would coordinate with other agencies to address related risks, warning that single-stock leveraged ETFs can amplify one-sided trading, increase concentration in specific stocks and exacerbate market volatility.

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