The Kospi falls more than 2% to the 6,600 level on Thursday as foreign and institutional investors sell in tandem. [Yonhap]
The Kospi falls more than 2% to the 6,600 level on Thursday as foreign and institutional investors sell in tandem. [Yonhap]

The Kospi has struggled to hold above the 7,000 mark, even as Samsung Electronics became the first Korean company to post quarterly operating profit exceeding 100 trillion won ($74.7 billion). The benchmark index has instead retreated to the 6,600 level.

The Kospi is now hovering nearly 30% below the year-to-date high it set in June, lagging well behind major markets including the United States and Japan.

According to Korea Exchange, the Kospi closed at 6,625.93 on Thursday, down 2.62% from the previous session.

That marks a 27.30% decline from the closing high of 9,114.55 recorded on June 22, and a 29.40% drop from the intraday high of 9,385.59 set on June 19.

After hitting its year-to-date peak, the Kospi slid back to the 5,000 range in late July before recovering above 6,000. It has since stalled near the 7,000 level without a clear further recovery.

The global backdrop has not been favorable — US 10-year government bond yields broke above 5%, and questions emerged about the pace of AI development, weighing on markets worldwide.

Yet even against that backdrop, major markets in the US and Japan have continued to perform well, prompting analysts to note that the Kospi's resilience has been particularly weak.

From June 22, when the Kospi set its year-to-date high, through Tuesday, the NASDAQ Composite rose 5.24%.

The index closed at 27,599.79 on Tuesday (local time), setting a new all-time high.

Japan's Nikkei 225 rose 0.35% over the same period, recovering the 70,000 level for the first time in more than three months.

Taiwan's Taiex gained 4.33% over the same stretch and set a new closing high of 49,822.55 on Tuesday.

Analysts attributed the Kospi's recent weakness primarily to a shortage of fresh capital to drive the index higher.

"Liquidity in the Korean stock market is more depleted now than it was in the first half of the year," said Kim Dae-jun, a researcher at Korea Investment & Securities. "In this environment, it will be difficult to expect a sharp recovery in large-cap stocks."

Investor deposit balances — funds parked and awaiting investment — stood at 100.38 trillion won as of Tuesday, down from 121.63 trillion won at the end of June.

The flight of foreign capital has also been a significant drag. Foreign investors net sold 197.03 trillion won worth of Kospi shares from the start of the year through Thursday. That dwarfs net purchases by retail investors of 96.3 trillion won, institutions of 37.1 trillion won and other corporations of 62.93 trillion won over the same period.

Foreign investors net sold 85.5 trillion won worth of Samsung Electronics shares and 86.13 trillion won worth of SK hynix shares during the period — a combined net selling of more than 171 trillion won from just the two flagship semiconductor stocks.

Analysts said the heavy selling reflects profit-taking pressure after both stocks posted strong gains in the first half of the year.

"The direction of the Kospi from mid-October onward hinges on whether foreign investors return as net buyers," said Lee Jun-young, a researcher at Eugene Investment & Securities. "Foreign net selling in the Kospi since the start of the year has exceeded twice the volume of retail net buying."

Lee added that as third-quarter earnings releases get underway in earnest, the market is likely to shift toward stock-picking driven by individual earnings results.


jiyun@heraldcorp.com