Kiwoom Securities "The Persistence of Volatility Amplification Will Be Limited"

Kiwoom Securities anticipated on the 4th that short-term price volatility in the domestic stock market, which reopens immediately after the lifting of martial law, is inevitable, but the persistence of increased volatility is expected to be limited.

On the 3rd at 10:28 PM, President Yoon Seok-yeol declared martial law. Immediately after the declaration, the won-dollar exchange rate surged to the 1,444 won level. The MSCI Korea Index ETF (EWY), traded in the U.S., also plummeted by more than 6% at one point. On Upbit, the kimchi premium for most cryptocurrencies, including Bitcoin, recorded a negative 20% range.

At 4:30 AM on the 4th, President Yoon Seok-yeol approved the lifting of martial law at a Cabinet meeting, ending the martial law situation in about six hours.

Han Ji-young, a researcher at Kiwoom Securities, explained, "Short-term price volatility may be inevitable after the domestic market opens," adding, "Since authorities such as the Ministry of Economy and Finance and the Bank of Korea can actively implement financial market stabilization measures, the persistence of increased volatility will be limited." She further stated, "Rather than reacting to panic selling movements that may occur immediately after the market opens by changing positions, it is necessary to observe changes in the won-dollar exchange rate and respond with a wait-and-see approach."

She analyzed, "From the investors' perspective, it is fortunate that a worst-case scenario of a black swan event did not materialize," adding, "Above all, since the KOSPI index has been calculated since January 1, 1980, and martial law has never been declared before, it was impossible to predict future stock market changes based on past data."

She explained, "Although the martial law situation ended in six hours, the fact that price levels in financial markets such as EWY and the exchange rate rose to levels higher than the previous day's closing is itself a concerning factor," adding, "Since Korea's unique political uncertainty has intensified, there is a possibility of short-term expansion of volatility in the domestic stock market," emphasizing, "This could also undermine expectations that the aggressive net selling by foreigners will come to an end."