The KOSPI has experienced significant fluctuations, leading to a sharp decline in trading volume and value in the domestic stock market. As the market has seen wild swings, investor sentiment has turned cautious. Retail investors continue to buy, absorbing foreign sell-offs, but there is a noticeable decrease in leveraged investments, with a shift towards cash-based strategies.
According to the Korea Exchange, the average daily trading volume for the Korean stock market (including KOSPI, KOSDAQ, Next Trade, and ETFs) in August has been recorded at 32.1 trillion won. This is about half of the daily average trading volume of over 60 trillion won seen during the strong upward trend in May and June.
The decline in trading volume is largely attributed to the recent sharp corrections in the stock market, which have dampened trading activity among investors. The KOSPI reached a record high of 9,114.55 on June 22 but has since experienced significant drops and rebounds, falling to the 5,500 range at one point. Although it has recently climbed back to the 6,200 range, the extreme volatility, with the index moving several percentage points in a single day, has led many investors to adopt a wait-and-see approach rather than actively trading.
However, retail investors have not completely curtailed their buying activity. The Korea Exchange reports that retail investors have net purchased approximately 175 trillion won in the Korean stock market this year. The trend has continued into August, with net purchases by individuals reaching 10 trillion won over the first five trading days of the month. During the same period, foreign investors net sold about 7.8 trillion won, indicating that retail investors have effectively absorbed most of the foreign sell-offs.
Nonetheless, retail investors are not enduring the downturn in the same manner as in the past. A notable change is the reduction in leveraged investments. The balance of credit transactions for retail investors peaked at 38.6 trillion won on June 24 but has since fallen to the 28 trillion won range. This suggests that investors who had increased their investment size using credit during the market's rise are now prioritizing debt reduction as the correction phase intensifies. Despite ongoing buying activity, the total deposit amount for investors has also decreased, dropping from nearly 140 trillion won in June to around 104 trillion won as of August 5.
Experts suggest that to continue filling the gap left by foreign capital, new catalysts are needed to attract foreign investment back into the market. Na Jeong-hwan, a researcher at NH Investment & Securities, stated, “To attract additional foreign capital at this point, new catalysts such as concrete shareholder return policies or regulatory changes are necessary, particularly regarding inheritance and gift tax reforms.”
* This article has been translated by AI.
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