Kospi seeks direction ahead of Chuseok holiday

South Korea's stock market is likely to trade without a clear direction Monday as investors brace for the Chuseok holiday, which runs from Thursday through Sunday.

The Kospi closed at 6,894.23 on Friday, up 2.66 percent from the previous session, as foreign investors returned to net buying for the first time in eight trading sessions.

At the close of the regular session at 3:30 p.m., foreign investors and institutional investors net purchased 438.8 billion won ($318 million) and 1.51 trillion won, respectively, while retail investors net sold 3.59 trillion won.

Including aftermarket trading from 4 p.m. to 8 p.m., foreign and institutional investors remained net buyers at 448.6 billion won and 1.53 trillion won, respectively, while retail investors were net sellers at 3.64 trillion won.

Other corporations — which have emerged as a major market force recently due to large-scale buybacks by Samsung Electronics and SK hynix — net purchased 1.66 trillion won.

According to Korea Exchange's corporate disclosure channel, Samsung Electronics bought back 39.8 million of its own shares over 20 trading sessions beginning Aug. 24, completing 74.69 percent of its total target of 53.29 million shares. The cumulative buyback amount stands at 10.31 trillion won.

SK hynix also bought back 14.15 million shares over 22 trading sessions starting Aug. 20, completing 58.79 percent of its total target of 24.07 million shares. Its cumulative buyback amount reached 24.39 trillion won.

Combined, the two companies have spent 34.7 trillion won ($25.1 billion) on buybacks. At the current pace, both programs are expected to conclude around mid-October.

"Expanded shareholder returns are a factor supporting the downside of share prices," said Lee Jeong-bin, an analyst at Shinhan Securities. "In particular, buybacks by non-financial companies have shown relatively strong performance and low downside beta during market downturns."

US stocks also showed a partial recovery in investor sentiment, aided by falling oil prices. The Dow Jones Industrial Average slipped 0.18 percent, while the S&P 500 and the NASDAQ Composite rose 0.17 percent and 0.39 percent, respectively.

The recovery was also supported by data showing that last week's declines in crude and refined oil inventories tracked by the US Energy Information Administration were smaller than the market had expected, while gasoline and diesel inventories either rose or held up better than anticipated, easing supply-side concerns.

West Texas Intermediate crude for October delivery fell $1.61, or 1.58 percent, to $100.30 per barrel, while Brent crude for November delivery dropped $0.95, or 0.91 percent, to $103.87 per barrel.

Major semiconductor stocks posted strong gains — Nvidia rose 1.34 percent, Broadcom 2.97 percent, AMD 2.70 percent and Micron 3.92 percent — lifting the Philadelphia Semiconductor Index 2.78 percent and extending its surge to a second consecutive session after a 3.14 percent jump Sunday.

Indicators tied to Korean market sentiment were mixed. The MSCI Korea ETF fell 0.59 percent, while the MSCI Emerging Markets ETF rose 0.18 percent.

The Russell 2000 fell 0.50 percent and the Dow Jones Transportation Average dropped 0.52 percent. KOSPI 200 night futures rose 0.22 percent.

Lee Kyung-min, an analyst at Daishin Securities, said oil and interest rate pressures — which had been capping the Kospi's upside and stoking volatility at every rebound — appeared to have entered an easing phase as of last week. He cited US President Donald Trump's remarks that he was in talks with Iran ahead of the midterm elections, as well as China's engagement with Iran to foster a conciliatory atmosphere ahead of a US-China summit on Thursday.

Lee also noted that Kospi returns around the Chuseok holiday have historically followed a "weak before, strong after" pattern, with post-holiday performance tending to outpace pre-holiday returns. "Any increase in volatility before the Chuseok holiday is an opportunity to build positions," he said.

"Looking at data from 22 past years, the average return in the five trading days before the holiday was minus 0.05 percent, while the day immediately before the holiday — with a 73 percent probability of gains — and the five trading days after — averaging plus 1.34 percent with a 68 percent probability of gains — have been favorable," Lee said. "In particular, in years when the market was weak before the holiday, the five-day post-holiday return averaged plus 1.65 percent, with a 73 percent probability of gains."