KOSPI200Index Futures

▪ KOSPI traded mixed yesterday due to the apparent lack of directional moves. Without a significant factor, KOSPI drifted out following other financial markets. Wall Street’s advance on the back of oil price drop put a positive spin in the beginning, but soon started to decline taking negative cues from Chinese stocks.

▪ In essence, KOSPI does not have the fundamental drivers on its own. It has been wandering around against a backdrop of mixed signals from global financial markets. The low levels of the implied volatility, derived from the option premiums on the market, prove KOSPI’s steadiness.

▪ Arbitrage trading recorded net short of 126.2 billion Won. Foreign investors’ net buying explains in part the weak market basis. Conversion or reversal players’ squaring-off pressure prior to the option expiration date has been somewhat relieved. As the negative arbitrage trading was offset by the positive non-arbitrage with the same magnitude, overall program was only 4.3 billion Won of sales.

▪ A fall in open interest and the considerable amount of reverse cash-and-carry trading is seemingly an attempt to reduce the strain of long arbitrage interest.

▪ US stocks dropped last night as JP Morgan posted credit loss and some analysts cut profit estimates for Goldman Sachs. A weak downward pressure in the first half of the day is expected across the KOSPI markets.

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