Don’t bet on a coronavirus rebound, the FSS warns

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Don’t bet on a coronavirus rebound, the FSS warns

The Financial Supervisory Service (FSS) warned retail investors Tuesday to refrain from making rash investment decisions as the recent market volatility does not guarantee profit. It is the institution’s first warning to retail investors since the coronavirus outbreak started to batter debt, equity and other instruments in February.

“The latest market volatility driven by Covid-19 is of a different type compared to the previous financial crises. It is highly difficult to predict what will come next in the stock market,” the regulator said in a release.

“New investors, especially those who don’t have much experience in stock trading, need to be especially cautious when making investment.”

The market volatility in March in Korea-traded stocks was seen as a once-in-a-lifetime opportunity for individual investors who believed the index would eventually rebound after the coronavirus subsides. That is what happened after the crises in 1997 and 2008.

The VKOSPI index, which tracks volatility of the Kospi 200, reached 48.55 in March. It was 14.69 in December.

Retail investors net purchased 6.3 trillion won ($5.2 billion) in Kospi and the Kosdaq stocks in January and 6 trillion won in February. The total more than doubled in March, when retail investors scooped up a net 12.7 trillion won.

The FSS recommended using idle money as principle for investment. Using leverage or scraping together savings that needs to be used elsewhere soon, such as for house deposits or education expenses, should be avoided, according to the regulator.

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