KOSPI panic sell-off headlines are exaggerated

Today will be dominated by headlines about the KOSPI sell-off and the index hitting circuit breakers which is an automatic exchange mechanism aimed at reducing volatility and aiding price discovery during sudden moves.

The reason behind the sell-off is the regulator cautioning against the use of leverage.

While this triggered the 10% pullback, it is just a warning and risk-control measure rather than concrete action or a ban on leveraged products.

Leveraged products will continue trading and this is likely to subside as again, no action will be taken to curb exposure.

With this being said, note that this type of reaction tends to happen in overleveraged markets and caution is always the way to go.

The EWY which is the ETF tracking the KOSPI should stabilize around $195 - $200 looking at market exposure and market maker positioning.

This sell-off is also affecting risk appetite in the S&P 500, as 18% of it is semiconductors, which are highly correlated with the KOSPI.

Given that the 10% sell-off is likely overblown, SPY should also start recovering along with semiconductor and memory stocks.

On a side note, MU earnings are today, so vol will remain elevated.

Not investment advice, do your own research