KOSPI rises to record high as volatility index also increases

The benchmark Korea Composite Stock Price Index climbed 3.55 percent to finish at a record 8,476.15 on Friday, according to Korea Exchange data. The KOSPI 200 volatility index, or VKOSPI, closed at 74.26, up 3.72 percent from the previous session. VKOSPI has risen for four consecutive sessions since Tuesday.

The index has increased 36 percent this month while the KOSPI has gained more than 27 percent.

Market concentration and leveraged products The unusual simultaneous rise in both indexes follows increased weighting of Samsung Electronics Co. and SK hynix Inc. in the KOSPI 200. Samsung Electronics accounted for 26.6 percent of total market capitalization and SK hynix accounted for 23.9 percent.

The Korea Exchange introduced single-stock leveraged ETFs linked to Samsung Electronics and SK hynix earlier this week. Nearly 2 trillion won flowed into four major single-stock leveraged ETFs on Tuesday alone. On that day the KOSPI rose 2.2 percent to 8,228.7, yet only 75 stocks advanced while 826 declined.

A Hyundai Motor Securities analyst said KOSPI volatility has widened due to the growing weighting of the two chipmakers. A Samsung Securities analyst said leveraged products can amplify gains during rallies and deepen losses during downturns.