‘No Cash Left to Average Down’: Retail Investors Reel as Kospi Nears 6,000 Break

Average daily retail buying plunges to 1.545 trillion won from 3.562 trillion won

No new buyers despite stronger earnings, sapping rebound momentum

Concern is mounting that the Kospi could break below 6,000 as South Korean retail investors, who had been absorbing heavy foreign selling, appear to be running out of firepower. With trading value also shrinking sharply, there are few buyers left to prevent further declines, undermining the market’s demand support.

According to EpicAI, an AI-based investment information platform, foreigners were net sellers of more than 1 trillion won a day on the Kospi in 26 trading sessions during May and June. The index fell on only 11 of those days and rose on 15.

The benchmark was relatively resilient even when foreign selling exceeded 3 trillion won. On May 13, foreigners were net sellers of 3.7227 trillion won, but the Kospi rose 2.63%. On May 18, the index gained 0.31% despite net foreign selling of 3.6492 trillion won. On June 30, foreigners sold 3.7992 trillion won worth of shares, yet the Kospi still climbed 0.97%.

More recently, that pattern has changed. On Sept. 14, the Kospi fell 3.26% after foreigners posted net selling of 3.3375 trillion won. On Sept. 28, it dropped 2.70% as foreigners sold 3.2682 trillion won. From September through Oct. 13, the Kospi fell on 14 of the 15 trading days when foreign net selling exceeded 1 trillion won.

The key difference is that domestic investors are no longer buying with the same intensity. On days when foreigners were net sellers of more than 1 trillion won, retail investors posted average daily net purchases of 3.562 trillion won in May and June. That fell to 1.545 trillion won in September and October, less than half the earlier pace.

Institutions are no longer providing support either. Under the same conditions, they were average net buyers of 280 billion won a day in May and June. In September and October, they turned into average net sellers of 390 billion won. Unlike the first half, when retail and institutional investors absorbed foreign selling together, both domestic buyer groups have recently weakened at the same time.

Trading across the broader market has also slowed sharply. Average daily trading value on the Kospi stood at 50.3 trillion won in May and June. That dropped 57% to 21.4 trillion won in September and October. Compared with the May 29 peak of 80.3 trillion won, recent average daily turnover is down more than 70%.

Brokerages say a rebound may be difficult because retail investors have already poured large sums into the market and have little room left to buy more. Many mom-and-pop investors are sitting on losses from the 7,000 to 8,500 range, and the Kospi has failed to close above 7,100 since July 15, when it ended at 7,284.41.

LS Securities said retail investors have injected about 195 trillion won into the stock market since July 2024, and the shift into investment assets caused the liquidity assets of households and nonprofit organizations to fall from a year earlier for the first time since the global financial crisis. Jung Da-woon, an analyst at LS Securities, said both retail investors and domestic institutions have limited buying capacity. Foreign net selling is now amplifying price swings.

A sustained rebound will be hard to achieve until foreign flows stabilize. Institutional investors including the National Pension Service are cited as potential buyers, but large additional purchases are constrained because they have already filled much of their domestic equity allocation.

Pension funds were net sellers of 433.1 billion won in September and sold another 39 billion won this month. Kim Seok-hwan, an analyst at Mirae Asset Securities, said strong earnings can put a floor under declines, but it is hard to build an upward trend without a new class of buyers.

A senior executive at a Yeouido brokerage said the domestic market’s ability to cushion foreign selling has effectively reached its limit. Retail investors have used up much of their available investment cash, and institutions have also turned into net sellers, making the demand vacuum increasingly clear.

The sharp drop in trading value signals that risk appetite has not recovered enough to bring in bargain hunters, the executive added. If foreign selling pressure does not ease, a break below 6,000 on the Kospi is only a matter of time.

Kang Kyung-ju, Hankyung.com reporter memory@hankyung.com