The South Korean stock market has experienced significant corrections for four consecutive months since late June. In October alone, the KOSPI index plummeted more than 20% in just two weeks, raising concerns among investors as the downward trend continues without a clear rebound. Analysts predict that the prolonged supply-demand gap, caused by exhausted retail buying power, delayed pension fund rebalancing, and the end of stock buybacks by Samsung Electronics and SK Hynix, will make a recovery difficult in the near term.
According to the Korea Exchange, the KOSPI index fell by 1,449.52 points (20.70%) from October 6 to October 16. On the first trading day of last week, October 12, it dropped over 3%, followed by a 5.5% decline on October 13, which brought it down to the low 6,000s. The index continued to fall with losses of 0.4% on October 14 and 7.6% on October 15, ultimately crashing to the 5,500 level.
On October 16, the index saw a slight rebound, closing at 5,668.05, but it still marked a 14.5% decline over the previous week. This drop is the fourth largest adjustment since the IMF crisis in December 1997 (-25%), the global financial crisis in October 2008 (-31%), and the COVID-19 pandemic in March 2020 (-25%).
The significant decline in the South Korean stock market compared to global markets in the U.S., Japan, and Taiwan can be attributed to several factors: the exhaustion of retail investor buying power, the postponement of pension fund rebalancing, and the cessation of stock buybacks by Samsung Electronics and SK Hynix.
Currently, many retail investors are trapped in loss positions due to the prolonged correction that began in June, and the limited buying capacity of institutions due to delayed pension fund rebalancing has left the market unable to absorb foreign selling pressure. Additionally, the large-scale stock buybacks by Samsung Electronics and SK Hynix, which account for over 60% of the market capitalization, have also ended.
In this challenging environment, ongoing concerns about profitability related to big tech companies' investments in artificial intelligence (AI) continue to weigh on the domestic market. On October 16, the three major U.S. stock indices fell, particularly impacting AI and semiconductor-related stocks.
Seo Sang-young, a managing director at Mirae Asset, stated, "The decline in semiconductor stocks is a result of a reevaluation of high future profit expectations rather than deteriorating performance, combined with a reduction in positions by institutional investors. For the South Korean stock market to rebound, stability in the spreads of U.S. corporate bonds related to AI and a reduction in foreign selling pressure are necessary."
* This article has been translated by AI.
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