Encouraging Signs
The number of Korean stocks reaching their lower price limits has greatly decreased since the introduction of the new price limits of ?30 percent on June 15. Specifically, the number had reached 4.1 on an average day between early this year and June 12, but declined to 0.4 between June 15 and July 10.
The number of those hitting the ceiling decreased too, and that of those reaching the price limits in either way declined from 18.7 to 10.7 on an average day. In the KOSPI market, however, the number of those reaching their upper limit prices went up from 6.4 to 7.0, as some preferred stocks showed an abnormally rapid increase in price. A daily average of 24 stocks gained or lost at least 15 percent between June 15 and July 10.
The trading value increased after the price range adjustment, too. Since June 15, the daily average trading value has increased by 18.0 percent to 10.5 trillion won (US$9.18 billion), with those of the KOSPI and KOSDAQ rising from 5.4 trillion won (US$4.7 billion) to 6.1 trillion won (US$5.3 billion), and from 3.5 trillion won (US$3.1 billion) to 4.4 trillion won (US$3.8 billion), respectively. The Korea Exchange explained, however, that this is attributable more to the Greek default crisis and Chinese stock market plunge than to the new price limits. “Not a few individual investors were thought to leave the stock market due to the expansion of volatility, but the ratio of trading has increased since the middle of last month,” it said.
In the KOSPI, the ratio of individual trading has gone up from 53.0 percent to 57.4 percent during the period, whereas the percentage in the KOSDAQ has shown no meaningful change. The static volatility interruption, adopted in order to prevent rapid fluctuations in stock prices, has been triggered 127.2 times in the KOSPI and 118.1 times in the KOSDAQ on an average day.