The KOSPI index has been stuck in a prolonged sideways market. Since reaching a closing price of 7,096 points on July 23, the index has struggled to break through the '7,000 wall' for over a month. While forecasts suggest a potential rise above 9,000 points, many investors express frustration over the ongoing stagnation.
KOSPI Stuck Below 7,000 Points
According to the Korea Exchange, the KOSPI closed at 6,562.72 points on September 2, down 273.08 points (3.99%) from the previous trading day. After attempting to breach the 7,000 mark for two consecutive days, the index reversed course due to renewed clashes between the U.S. and Iran, which negatively impacted U.S. stock markets.
Since July 23, the KOSPI has failed to surpass the 7,000 mark for more than a month and a half. Although the volatility has decreased, the market has not shown signs of recovery. The KOSPI 200 volatility index (VKOSPI) recorded 43.37, a drop of about 46.3% compared to 80.78 on the first trading day of last month. The VKOSPI peaked at 82.05 on August 4 but has steadily declined, falling into the 40s for the first time since mid-April.
90 Trillion Won Retail Investor Sell Wall
Market analysts attribute the KOSPI's underperformance to various factors, including a significant sell wall created by retail investors. According to Kiwoom Securities, the net buying amount by individual investors above the 7,000-point level is estimated at approximately 87 trillion won. This includes 18.9 trillion won in the 7,000 to 7,500-point range, 30.2 trillion won in the 7,500 to 8,000-point range, and 28.3 trillion won in the 8,000 to 8,500-point range. The 8,500 to 9,000-point range has about 6.2 trillion won, while the 9,000 to 9,500-point range has around 3.4 trillion won.
This large volume of sell orders has created a structure where selling pressure emerges each time the index rises, as investors seek to recover losses or recoup their principal. Han Ji-young, a researcher at Kiwoom Securities, stated, "The resistance at 7,000 points is the result of both multiple burdens and retail sell pressures rather than a simple fundamental deterioration. There is a need for foreign and institutional buying momentum to absorb the accumulated retail sell orders in this range."
Foreign Investor Buying Power Reaches Limits
Another analysis points to the limits of foreign investor buying power. As of September 1, foreign ownership of KOSPI stocks reached 19.70%, a record high during the reporting period. The foreign ownership ratio of market capitalization also approached 39.54%, nearing the 40% threshold. With the foreign ownership limits of major KOSPI stocks nearly exhausted, the influence of foreign investors on the market has effectively peaked.
Market analysts interpret this as a depletion of available buying power. It suggests that foreign investors have filled their quotas, leaving little room for additional capital inflow. However, some view the stagnation at the 7,000 level as a natural adjustment process following a rapid rise, rather than a limitation of supply from specific entities like foreign investors. Choi Hyun-jae, head of the research center at Yuanta Securities, explained, "If the market rises too quickly, a price adjustment is necessary, and some consolidation is needed for a sustained upward trend. We are currently in a process of digesting sell orders."
Impact of Rising U.S. Interest Rates
The rise in long-term U.S. Treasury yields is also cited as a contributing factor. Analysts suggest that increasing interest rates exert downward pressure on the stock market. Last month, the yield on 30-year U.S. Treasury bonds surpassed 5.2%, the highest level in 19 years, and long-term bond yields continue to soar.
On the same day, the yield on 10-year U.S. Treasury bonds reached 4.788%, marking the highest level since January of last year. Japanese 10-year bond yields also rose to 3%, the highest in 30 years, while the yield on 30-year British bonds climbed to 5.919% during the day.
A securities industry official noted, "Stability in U.S. interest rates is necessary for investor sentiment towards risk assets to recover. For the KOSPI to achieve further upward movement, a stable global interest rate environment must precede it."
* This article has been translated by AI.
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