The KOSPI plunged more than 3% in a single session, falling back to the 5,500 level. Despite overnight strength on Wall Street and strong earnings from U.S. Big Tech firms, lingering concerns over artificial intelligence spending triggered selling centered on large-cap chip stocks. On the supply-and-demand side, retail and institutional investors that had been absorbing foreign selling have seen their buying capacity weaken, while large-scale share buybacks by Samsung Electronics and SK hynix have both wrapped up, adding to the unease. Cash parked on the sidelines has also slipped to the 80 trillion won range for the first time in nine months, fueling concerns that the domestic market's buying base is growing steadily more fragile.
The KOSPI closed at 5,533.77 on the 22nd, down 201.89 points, or 3.52%, from the previous session, according to the Korea Exchange. That marked the lowest close since April 7 (5,494.78), effectively returning the index to where it stood six months ago. Samsung Electronics (005930.KS) fell 4.03%, while SK hynix (000660.KS), dogged by a continuing controversy over the dual listing of its U.S. subsidiary Solidigm, slid 5.49%. All of the top 20 stocks by market capitalization, excluding preferred shares, ended lower. Retail investors bought a net 380.8 billion won ($264 million) worth of shares, while institutions sold a net 462.7 billion won. Foreign investors expanded their buying late in the session to finish with a net purchase of 59.2 billion won, extending their buying streak to two sessions.
The index struggled as profit-taking following the previous day's surge coincided with broad weakness across Asian chip stocks. Meta Platforms reported revenue above market expectations, but heavy capital spending pushed its third-quarter free cash flow into the red, renewing concerns about the profitability of AI infrastructure investment. The Bank of Korea's decision to hold its base rate at 3.00% while signaling the possibility of a further increase also weighed on investor sentiment, analysts said.
The index's direction has recently tracked closely with foreign investors' trading. Cumulative net selling by foreign investors reached 17.403 trillion won in October. Over 14 trading sessions, the direction of foreign net trading matched the direction of the KOSPI on 12 days, or about 86% of the total. During the 6th through the 15th, when foreign investors sold for seven consecutive sessions, the KOSPI fell throughout, plunging 20.7% over the same period.
Analysts pointed to the weakened buying capacity of investors who absorb that selling, rather than the scale of foreign selling itself, as the more fundamental problem. "Foreign investors have been selling continuously since October last year, and the outflow should be seen as a constant rather than a variable," said Kim Hak-kyun, head of the research center at Shinyoung Securities. "What matters in the end is that the strength to absorb that selling has weakened."
Conditions are no easier for retail investors. Investor deposits, which represent cash waiting to enter the market, stood at 89.6343 trillion won as of the previous day, down 663.1 billion won from a day earlier, according to the Korea Financial Investment Association. That was the lowest level in about nine months, since Jan. 14 this year, and marked a seventh straight session of decline. "Trading value has been cut roughly in half from its peak, and there is no aggressive buyer in the market," said Lee Jin-woo, head of the research center at Meritz Securities. "Unlike in the past, the momentum behind institutional program trading has died out, and retail investors have no buying capacity either, so the index slides easily even when only a small volume of shares comes to market."
The back-to-back completion of share buybacks by large-cap chipmakers, which had cushioned downward pressure on the market, is another burden. Samsung Electronics finished a 15 trillion won share repurchase on the 6th of this month, and SK hynix completed a 40 trillion won buyback the previous day. In SK hynix's case in particular, other corporate entities had absorbed most of the shares sold on a net basis by foreign, retail and institutional investors over roughly two months. Net buying by those entities, which at one point averaged 1.6 trillion won a day, shrank to around 20 billion won on the day, making the buying vacuum visible.
Some analysts say there is ample room for a medium- to long-term rebound given solid corporate earnings outlooks. Hanwha Investment & Securities on the day forecast a KOSPI range of 6,000 to 9,300 for next year. The brokerage judged that corporate profitability is not fully reflected in share prices, noting that the KOSPI's 12-month forward return on equity stands at 25.5% while its price-to-book ratio is just 1.08 times. "The macro environment is heavy, but prices have already fallen more than that would justify," said Ha Jang-kwon, an analyst at Hanwha Investment & Securities. "We recommend buying below the 6,000 level."