KOSPI volatility intensifies after leverage launch, pushing H1 volatility interruptions to record high

Jul 06, 2026, 09:46 am

Amidst extreme volatility in the KOSPI, the number of volatility interruptions (VIs) triggered in the first half of this year reached an all-time high. A volatility interruption is a mechanism that temporarily shifts trading to a two-minute single-price auction when an individual stock experiences an abrupt price swing, designed to cool off rapid price fluctuations and curb volatility. Despite this safeguard, the market has remained highly volatile, with analysts pointing to the single-stock leverage ETFs (exchange-traded funds) launched in May as a primary cause. As substantial capital rushed into leveraged products tracking Samsung Electronics and SK Hynix—which together account for over 50% of the total KOSPI market capitalization—the daily trading range expanded more than twofold compared to the period prior to the ETFs' introduction.

According to the Korea Exchange on July 5, a total of 29,357 VIs were triggered in the first half of this year, marking the highest volume ever recorded for any half-year period. Driven by this heightened volatility, 43 stocks were designated as investment-risk items during the same period. Market regulations typically classify speculative stocks in a sequence of investment-caution, investment-warning, and investment-risk; once designated as an investment-risk item, trading for that specific stock is suspended for the day.

The KOSPI has exhibited increasingly wild swings this year. On July 3 alone, the index staged a V-shaped rebound, plummeting below the 7,400 mark before surging back up to 7,800, sending shockwaves through the market. Following a 7.9% plunge on July 2, the index soared 5.8% on July 3, triggering back-to-back sidecars for both selling and buying orders.

Out of 14 stocks designated as short-term overheated items since 2020, nine received the designation this year alone. Notably, with the exception of Namhwa Industrial, all listed firms flagged as short-term overheated items—including SK Securities (preferred), Taeyoung Engineering & Construction (preferred), and Heungkuk Fire & Marine Insurance (preferred)—belonged to the main KOSPI market.

Market analysts observe that the ongoing volatility persists as top-cap mega-stocks take up an even heavier weighting in trading flows following the listing of leveraged ETFs. According to Yuanta Securities, the average daily trading range of the KOSPI has hovered around 425 points since the debut of single-stock leverage ETFs on May 27. This represents a sharp 88% increase compared to the pre-launch average daily range of 225 points. As this high-volatility environment lingers post-leverage launch, market participants are growing increasingly accustomed to these sweeping fluctuations.

Meanwhile, outlooks remain grim regarding a potential rebound for the KOSDAQ index. "The schedule for the KOSDAQ graduation system has been pushed back," noted Lee Jae-won, a market analyst at Yuanta Securities. "Given the persistent risk that capital inflows will remain heavily concentrated among a select group of top-tier stocks qualifying for the premium segment, the prospects for a broader sector rotation across the KOSDAQ remain unfavorable."

Yoon Seo-young

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