Xinhua News Agency: Why does the South Korean stock market "rise fast and fall fast"?

Firstly, the index is highly dependent on a few leading companies. Samsung Electronics and SK Hynix account for over 40% of the KOSPI index weight, meaning that the stock price fluctuations of these two companies largely determine the trend of the index. When the market heavily bets on the AI industry, the index rises much faster than most individual stocks; however, once funds leave the related sectors, the market is prone to simultaneous declines. Secondly, in recent years, a large amount of funds have further amplified market volatility through trading of single stock exchange-traded open-end index funds. These products in the Korean market track a single stock like Samsung Electronics or SK Hynix, and magnify the daily price fluctuations by two times. For example, if a stock goes up by 5%, the ETF product theoretically increases by about 10%; and vice versa. Industry insiders point out that these products can amplify returns in an upward market, but during market fluctuations, due to the need to adjust positions daily, investors may incur significant losses even if the stock price remains flat from the initial purchase, experiencing "volatility costs". After the recent increased volatility in the Korean market, the prices of multiple ETFs have dropped below their issuance prices, leading to a decrease in total market capitalization of nearly 3 trillion Korean won. Furthermore, this current market trend has attracted a large number of individual investors who use margin trading and leverage products to enter the market, making the market more sensitive to news, and further amplifying short-term fluctuations.