Retail investors are retreating from both domestic stocks and riskier assets as the Kospi tests its ability to hold the 7,000-point line. After offloading domestic shares on a massive scale, they have also pulled back from buying US-focused ETFs listed in Korea. Analysts warn that selling pressure is building in the 7,000–7,500 range, where profit-taking by both retail and foreign investors is concentrated.
According to Korea Exchange, retail investors net sold 17.92 trillion won ($12.9 billion) on the Kospi from the start of this month through Tuesday. It marks the first monthly net selling in five months, since April, and the net selling volume already surpasses April's 15.52 trillion won to set a monthly record for this year.
Retail investor flows have tracked the market's swings closely. When the Kospi plunged in March amid the shock of a Middle East war, retail investors net bought 33.57 trillion won. As the index rebounded in April, they net sold 15.52 trillion won, then returned to net buying from May through August. In September, even as the Kospi recovered to the 7,000 level, they net sold 17.92 trillion won.
The pullback extends beyond domestic shares. Retail net purchases of US equity ETFs listed in Korea fell by roughly half, from 2.8 trillion won in August to 1.4 trillion won this month. The trend suggests investors are not simply rotating out of Korean stocks and into US assets — they are pulling back from risk overall.
Despite the sustained retreat by retail and foreign investors, the Kospi has been consolidating around the 7,000 mark. The index climbed to 7,051.64 on Sept. 9 before sliding to 6,684.37 on Sept. 14, then rebounded to close at 7,017.91 on Tuesday. Institutional buying and share buybacks by Samsung Electronics and SK hynix have filled the gap left by other sellers, supporting the index. So far this month through Tuesday, retail and foreign investors have each been net sellers on the Kospi — by more than 5 trillion won and more than 1 trillion won, respectively.
While selling pressure from retail and foreign investors is already visible around the 7,000 level, the market's bigger concern is what lies above it. The heaviest supply overhang from this year's Kospi rally is concentrated in the 6,500–7,000 range, but analysts say selling pressure could intensify further once the index moves decisively above 7,000 and into territory where profit-taking kicks in earnest.
"In terms of trading volume, the 6,500–7,000 range is the thickest, but the supply wall the index will run into on the way back up sits at 7,500," said Park Yu-an, a researcher at KB Securities. "Above 7,500, retail selling and foreign profit-taking could converge."
Industry watchers expect the market to become increasingly differentiated by sector and individual stock momentum once the Kospi moves past 7,000. "Rising international oil prices are dampening investor sentiment somewhat, putting the Kospi's support at 7,000 to the test," said Lee Kyung-min, a researcher at Daishin Securities. "Even so, sector-specific catalysts remain in place, so rather than the whole market moving in lockstep, we expect a divergence driven by sector-level momentum."
kacew@heraldcorp.com
