The KOSPI logged its worst month since the global financial crisis despite a late rebound, as retail investors reversed from heavy buying to record selling amid repeated circuit breakers and anger over leveraged single-stock ETFs and policy.
Seven out of 10 companies listed on South Korea's KOSPI and KOSDAQ posted losses between June 30 and July 31 as semiconductor-cycle concerns and Middle East geopolitical risks triggered a broad retreat. The Korea Exchange said 1,859 of 2,645 listed companies declined, including 566 of 917 KOSPI stocks and 1,293 of 1,728 KOSDAQ names. The KOSPI fell 22.2% and the KOSDAQ dropped 21.4%, their steepest monthly declines since October 2008, even after an 18% rebound on Friday. Bloomberg said retail investors, who bought about KRW 78 trillion ($54.2 billion) of KOSPI shares in May and June, turned record net sellers in July as the market triggered four circuit breakers and frustration grew over leveraged single-stock ETFs and government policy. Analysts at Daishin Securities and Kiwoom Securities said the market had moved into oversold territory even as earnings momentum remained intact, with Lee Kyung-min noting the KOSPI's 12-month forward P/E ratio had fallen to 4.7x, the lowest since 2000. Strategists said August's rebound will depend heavily on foreign buying after overseas investors logged a record net purchase of more than 7 trillion won on July 31, while retail investors recorded a record net sale of more than 8 trillion won.