South Korean retail investors, who had absorbed foreign selling for months, are running low on firepower as the stock market extends its slide. Their net buying has shrunk, and daily trading value has fallen by more than half from the first-half boom. Analysts say fears of a supply-demand vacuum have materialized as heavy foreign selling coincided with the end of share buybacks at Samsung Electronics and SK hynix.
Individual investors bought a net 6.89 trillion won ($4.8 billion) worth of shares on the main Korea Exchange board this month, according to Korea Exchange data released on the 13th. They purchased 2.05 trillion won on that day alone. Retail investors had absorbed foreign selling with net purchases of 35.09 trillion won in May and 42.40 trillion won in June, but their buying shrank sharply during the market correction in July, to 5.37 trillion won, and August, to 3.24 trillion won, before turning to net selling of 14.20 trillion won in September. They returned to net buying this month, but at far weaker intensity than in the first half.
Trading value and cash on the sidelines have also contracted. Average daily trading value on local bourses stood at 29.82 trillion won this month, down 50.6% from 60.36 trillion won in June. Investor deposits at brokerages totaled 100.44 trillion won as of the 12th, down 4.23 trillion won from the end of September, according to the Korea Financial Investment Association, barely holding above the 100 trillion won mark. Meanwhile, margin loan balance, a gauge of leveraged investing, remained elevated at 34.29 trillion won, meaning further price declines could trigger forced liquidations on insufficient collateral and add to selling pressure.
Brokerage analysts say retail investors have already committed so much cash to the market that their capacity for additional purchases has been severely depleted. Many are sitting on positions bought between 7,000 and 8,500, and the benchmark index has failed to close above 7,100 since July 15, when it finished at 7,284.41. Adding to the strain are the growing appeal of high-yielding bonds and the likelihood of persistent selling from investors taking profits or recouping losses on any rebound. "Buying capacity is limited for both domestic institutional and retail investors," said Jung Da-woon, an analyst at LS Securities. "Foreign net selling is widening the swings in prices."
Foreign selling has indeed intensified. Overseas investors sold a net 13.14 trillion won over six consecutive sessions from the 2nd through the 13th. Individuals bought 10.09 trillion won over five straight sessions starting the 6th but could not fully absorb the supply, showing that retail demand alone cannot offset the selling pressure. Cumulative foreign net selling on the main board reached 203.65 trillion won this year as of the 13th.
Market watchers expect a sustained rebound to remain out of reach until foreign flows stabilize. Institutions such as the National Pension Service are cited as potential buyers, but they have largely filled their domestic equity allocations, limiting room for large-scale purchases. Pension funds sold 433.1 billion won in September and another 39.0 billion won this month. "Strong earnings can put a floor under the decline, but without a new buyer, it is hard to build an uptrend," said Kim Seok-hwan, an analyst at Mirae Asset Securities.
The end of buybacks at Samsung Electronics and SK hynix, which had cushioned the selling shock, is another burden. Samsung Electronics has completed a 15 trillion won buyback, while SK hynix had executed 89.32%, or 35.73 trillion won, of its 40 trillion won repurchase plan as of the 13th. Lee Kyoung-min, an analyst at Daishin Securities, pointed to the two companies' buybacks as the reason the KOSPI rose 3.7% in August and September even as foreign investors sold a net 31.70 trillion won. "The reason the selling broke the index on the 13th was the disappearance of the buyback cushion," he said.