Since early August, the KOSPI has been exhibiting extreme volatility, skyrocketing by 171 TP3T in a single day only to plummet by more than 51 TP3T a few days later. Circuit breakers are being triggered repeatedly, and news outlets are warning of a "market crisis" day after day. Investors are confused; some blindly buy believing prices are low, while others, frightened, sell their entire holdings.
However, this extreme volatility is not just a simple fear. Large-scale selling by foreign investors and concentrated buying by retail investors collided head-on.It is a phenomenon where improved semiconductor earnings conflict with excessive market expectations, serving as a correction. If you properly understand this phenomenon and establish criteria for judgment, volatility can actually become an investment opportunity.
Foreign selling and individual buying: Extremely divergent judgments
One day, July 31, was enough. Samsung Electronics surged 26.811 TP3T, and SK Hynix surged 29.951 TP3T. On the same day, foreign investors net bought more than 5.7 trillion won in Samsung Electronics and SK Hynix, while conversely net selling about 1.4 trillion won across the entire KOSPI.
This is precisely the core of the current market. The surge in a specific stock began with concentrated buying by foreign investors, but at the same time, individual investors net bought 1.4 trillion won in other stocks, acting in stark contrast. As conflicting judgments unfolded simultaneously within the same market, volatility became extreme.
Foreign investors acted after reading the semiconductor fundamentals. Samsung Electronics Q2 Operating profit is 89 trillion 492.4 billion wonWith this, it recorded an all-time quarterly high, and SK Hynix Operating profit of 60.5426 trillion wonby The operating profit margin is approximately 761 TP3TIt reached [a certain level]. In particular, as sales of HBM, a high-value memory, are expected to increase more than threefold this year compared to the previous year, the performance improvement of semiconductor companies has become a reality.
The fact that investors move in completely opposite directions despite the same market and news does not mean that one side is wrong. It is a signal that the market is undergoing a correction.
“The Trap of ”Buy Because It’s Cheap”: Reading the Real Signals of a Sharp Decline
This is where many investors make a mistake. Seeing Samsung Electronics' stock price drop significantly from 270,000 won, they think, "It's cheap now, let's buy." However, it is difficult to distinguish from news headlines alone whether the stock has truly become cheap or is undergoing a correction after rising excessively.
The key is the 'direction of earnings.' In the case of Samsung Electronics and SK Hynix, second-quarter results met market expectations, and HBM4 is projected to grow more than threefold in the third quarter, accounting for over 601% of HBM sales in the second half of the year. Earnings are improving. Therefore, the recent sharp decline is likely an 'adjustment of excessive expectations' rather than a 'deterioration of fundamentals.'.
Conversely, if earnings deteriorate while the stock price falls, there is a high risk of further decline. Many investors fail to distinguish between the two, entering the market thinking, "It has dropped 101 TP3T, so it is cheap," only to experience an additional drop of 201 TP3T.
There is no need to panic if the sidecar sounds.
sidecar Because they are being triggered in succession, many investors interpret this as the market collapsing. This is not true. A sidecar is a safety mechanism that suspends program trading for five minutes when the futures index surges or falls by more than 51 TP3T (based on KOSPI) from the previous day's closing price and this condition persists for more than one minute.
It is a “stop” with the same name, but, Circuit breakerIt is different. It is triggered when the index plummets by 81 TP3T (Level 1), 151 TP3T (Level 2), or 201 TP3T (Level 3) compared to the previous day; in Levels 1 and 2, trading is suspended for 20 minutes followed by a 10-minute single-price trading session, and in Level 3, the market closes early for the day.
A circuit breaker is a 'warning' designed to prevent sudden fluctuations in futures from spreading to the spot market. Repeated triggering signals market instability, but it does not imply a market collapse. Rather, it is more accurate to interpret it as an indication of "significant disagreement in investor judgment.".
Traps that investors repeatedly fall into
There are two common mistakes in extremely volatile markets. The first is buying the entire position at once, convinced that "this is the bottom" after a sharp drop. The result is disastrous. You end up experiencing the plummeting stock drop an additional 20 to 301 TP.
The second is entering the market belatedly after seeing news of a surge. If you buy the next day saying, "I heard it skyrocketed to 261 TP3T," you will naturally get caught in a correction. A correction almost always follows an extreme rise. The trap is not knowing this and mistakenly believing that you can "ride the trend.".
Furthermore, in markets of extreme volatility, losses on leveraged products (leveraged ETFs, futures, and margin trading) are concentrated. For example, if the KOSPI drops by 51 TP3T, a 2x leveraged ETF drops by approximately 101 TP3T. As volatility becomes more extreme, this weighting of losses doubles.
| division | Activation conditions | Range of influence | Duration |
|---|---|---|---|
| sidecar | Futures ±5% (KOSPI) 1-minute continuation | Only program trading suspended | 5 minutes |
| Circuit breaker | Index Plunges ±8/15/20% | Total market halt | 20 minutes to market close |
Moving in separate groups while holding cash
Then, how should we respond? The simplest yet most effective method is... Maintain cash allocation of 20–301 TP 3TThat is what you do. It means there is an “opportunity to buy with spare cash” when prices plummet. Investors without cash inevitably become victims in a market crash.
The second method is split buying and selling. Instead of buying or selling the entire amount at once, you divide it into 3 to 5 transactions. Doing so relieves you of the pressure to "perfectly time your entry," and automatically lowers your average purchase price.
Finally, check to see if your portfolio is too concentrated in specific stocks or sectors. If a sector like semiconductors crashes, a concentrated portfolio takes a much greater hit than the market average.
Volatility is ultimately a time for choice
The extreme volatility of the KOSPI can be either a crisis or an opportunity. The difference lies in the investor's judgment criteria. For investors who judge solely based on market highs and target prices, it is a continuous source of confusion. However, for investors who read the direction of earnings, look at the essence rather than volatility, and manage risk through cash and stock splits, it is an opportunity.
Even if circuit breakers sound and the news fuels fear, your portfolio stems from your own judgment. Amidst volatility, what you must uphold is not returns, but the principle of limiting losses.