As the domestic stock market exhibited historic volatility, repeatedly plunging and rebounding during trading hours, an analysis has emerged that the confluence of external negative factors and the forced liquidation of leveraged investment funds widened the decline. Weakened confidence in policies and companies supporting the market was also cited as a fundamental cause of the increased volatility.

CEO Lee Kwang-soo appeared on Kim Ou-joon's 'Humility is Hard News Factory' on the 29th and analyzed that the previous day, the domestic stock market fell to the 5,900 level intraday before closing trading around the 6,200 level, recording the second-largest drop in history. He explained that market volatility has expanded to such an extreme that circuit breakers have been triggered eight times this year alone. A circuit breaker is a system that temporarily suspends stock trading to calm panic selling when the stock price index plunges beyond a certain level.

Simultaneous semiconductor-related issues arising in both China and the United States were cited as the direct causes of this decline. In China, concerns over intensifying competition in the global semiconductor market grew following news of ChangXin Memory Technologies' (CXMT) stock market listing and its development of proprietary lithography equipment. The analysis suggested that anxiety over how the accelerated pace of Chinese semiconductor companies' technological self-reliance could affect the market position and profitability of domestic semiconductor companies pressured investor sentiment.

In the United States, the circular investment controversy surrounding the artificial intelligence industry ecosystem centered on Nvidia was cited as a factor that heightened market vigilance. Questions were raised as to whether actual demand and corporate value had been excessively inflated through repeated investments and transactions among AI companies, which led to a concentration of profit-taking sell-offs in semiconductor and AI-related stocks that had previously driven the stock market rally.

The expansion of leveraged investment was also analyzed as a factor that amplified the stock market's decline. The explanation is that in a situation where many investors had utilized borrowed funds, margin trading, and leveraged products anticipating a stock price rise, losses rapidly mounted when the index plunged, triggering a chain reaction of forced liquidations and margin calls that led to additional selling.

"The Feeling That No One Is Taking Care of It"... The Disappearance of Support Levels Created by a Collapse in Trust

He described the core problem of the current stock market as "the feeling that no one is taking care of it." He stated that even as stock prices plummet, no bargain-hunting buying flows in, and faith in the long-term recovery of corporate fundamentals has weakened, causing the very support levels that uphold the market to collapse.

Generally, when stock prices fall excessively, investors who judge that prices have dropped below corporate value step in to buy. However, in a market where trust in policies, companies, and institutions has eroded, the fear of further declines can loom larger even if prices are low.

In such a situation, not only leveraged investors but also investors holding cash hesitate to buy. The diagnosis is that if long-term investment funds and bargain-hunting buyers, which should support the market during a downturn, disappear, selling pressure can surge even from minor negative factors, and the volatility of the domestic stock market could appear much larger than that of major overseas markets.

Government, Companies, and National Assembly All 'Insufficient' in Restoring Trust

The lack of visible proactive market stabilization policies from the government, corporate efforts to improve governance structures, and institutional responses from the National Assembly were also pointed out as factors making trust restoration difficult. In particular, criticism was raised that the government's approach of emphasizing global standards while suddenly announcing policies the market did not anticipate could actually increase uncertainty for investors.

When the direction of policies frequently changes or new regulations emerge without prior signals, it becomes difficult for investors to evaluate companies' future profits and the market environment.

Representative Lee diagnosed that stock market stabilization is difficult to achieve through simple liquidity supply or one-off stimulus packages. He argued that the political sphere and the government must demonstrate a clear will to improve the market and consistently pursue policies to enhance corporate value and protect investors.

He also called for going beyond merely repeating predictable policies and presenting policies that address the structural problems of the market through politicians' decisiveness. He emphasized that even after policy announcements, they must continue to deliver messages and give investors the conviction that the government and the political sphere are managing the market.

What Are the Key Variables for the Future Market?

Ultimately, the analysis suggests that to reduce volatility in the domestic stock market, it is necessary to respond to external variables such as the growth of China's semiconductor industry and the overheating controversy in the U.S. AI industry, while also examining the structure in which excessive leverage and margin trading amplify market shocks during a downturn.

Going forward, key variables in the market are expected to include whether there will be additional liquidation of leveraged funds, the scale of margin calls, the government's market stabilization messages, improvements in corporate governance, and whether the National Assembly will establish investor protection systems.

[This article is not intended to recommend the purchase or sale of any specific stock. The stock market can experience rapid price fluctuations depending on corporate performance, supply and demand, and market conditions, so investment decisions and responsibilities lie with the investor. Intraday stock prices and fluctuation rates included in the article may vary depending on the time of writing. This article was written with AI assistance.]