The KOSPI has taken an average of about 14 trading days this year to recover after double-digit losses from consecutive declines, data showed. With the index plunging more than 10% last week, attention is turning to how quickly it can bounce back.
The KOSPI fell a cumulative 20.7% over seven trading sessions from the 6th to the 15th, according to data from the Korea Exchange and financial data provider Yonhap Infomax on the 18th. For the week of the 12th to the 16th alone, the index dropped 14.5%. The streak ended on the 16th, the final session of the week, when the index rose 2.05% after seven straight sessions of losses.
The KOSPI briefly reclaimed the 7,000 level on the 2nd, closing at 7,003.74, before the run of declines took it down to 5,668.05 on the 16th.
Looking at cases this year in which the index posted double-digit losses over two or more consecutive sessions and later recovered them, the average recovery took 14.25 trading days. The KOSPI fell 17.2% over three sessions from July 28 to 30, then regained that ground on Aug. 13, 10 trading days later.
The index also lost 14.9% over three sessions from June 4 to 8 and recovered in seven trading days, while a 10.4% drop over four sessions from March 26 to 31 took six trading days to reverse. After falling 19.2% over three sessions from Feb. 27 to March 4, immediately following the shock of the outbreak of war in Iran, the index needed 34 trading days to recover.
Not every sharp drop has been followed by a recovery. The KOSPI fell 10.4% over three sessions from July 6 to 8, and after slipping below the 8,000 level it has yet to return.
Further back in time, recoveries have taken months or years. In March 2020, as fears of a COVID-19 pandemic intensified, the index plunged 25.7% over seven sessions from the 11th to the 19th. It recovered on May 19, 39 trading days later, as expectations grew for vaccine development.
A 12.1% loss over two sessions from Aug. 2 to 5, 2024, took about 10 months to recover. At the time, fears of an unwinding of yen carry trades — borrowing low-interest yen to invest in higher-yielding currency assets — weighed heavily on the market as the yen strengthened.
When concerns over a global economic downturn stemming from the U.S. and China swept through equity markets in the early 2010s, the index fell below 2,000 and stayed there for some time. After a 17% drop over six sessions from Aug. 2 to 9, 2011, it took until late April 2015 — three and a half years — to recover.
Foreign Buyers Seen as Key
Analysts say the return of foreign investors will be the key to recouping the KOSPI's recent losses. Lee Jae-won, an analyst at Yuanta Securities Korea, said cases in which the market failed to rebound after an oversold stretch were phases accompanied by additional economic or credit shocks, such as the global financial crisis and the European debt crisis, or by downgrades to earnings forecasts. He said no systemic financial crisis or structural damage to memory chip earnings forecasts has been confirmed at this point.
"The current extreme oversold condition is grounds for expecting a short-term rebound. Whether that rebound is sustained depends on whether concerns over AI funding translate into actual cuts to capital spending, and on whether memory earnings estimates for 2027 and 2028 hold," he said. "For the slide to stabilize, foreign selling must first lose intensity and buying must come in to absorb it."
From Jan. 2 this year through the 16th of this month, foreign investors sold a net 208.326 trillion won ($145 billion) worth of Korean shares. Over the same period, institutional investors bought a net 40.133 trillion won and retail investors a net 101.056 trillion won.