South Korea’s KOSPI Index Plummets Below 3400 Amid Foreign and Institutional Sell-Offs

South Korea's benchmark KOSPI index saw a sharp decline of over 2% on the 26th, slipping below the psychologically crucial 3400 mark as foreign and institutional investors aggressively offloaded shares. Despite resilient buying from individual investors, the sell-offs dominated, marking the index's third straight session of losses.

According to data from the Korea Exchange, the KOSPI closed at 3386.05, dropping 85.06 points (-2.45%) from the previous day’s close of 3471.11. The index opened weaker at 3440.39, down 30.72 points (-0.89%) from the prior session, and continued to slide throughout the day.

Key Factors Pressuring the Market: FX Rates and External Sentiment

Jae-won Lee, a researcher at Shinhan Investment Corp, identified two major pressures affecting the South Korean stock market: the depreciation of the Korean won past 1410 against the U.S. dollar and lowering expectations for an interest rate cut. The weakened currency dampened market sentiment and spurred foreign capital outflows, exacerbating the index’s downturn.

Adding to the uncertainty, remarks by former U.S. President Donald Trump questioning South Korea’s $350 billion investment in the U.S.—calling it "prepaid"—created geopolitical unease. This statement amplified concerns over foreign investment stability and indirectly pressured the South Korean won and equities markets.

Individual Investors Actively Buy, But Selling Pressure Weighs Heavily

While retail investors accelerated their buying activity, purchasing a net 1.36 trillion won ($1.14 billion) worth of equities in the KOSPI market, foreign and institutional investors dominated the sell-side. Foreign investors offloaded a net 832.2 billion won, while institutional investors sold a net 559.5 billion won, counteracting individual buying efforts.

Market heavyweights led the bearish performance: SK Hynix dropped 5.61%, LG Energy Solution fell 3.46%, Samsung Electronics sank 3.25%, and HD Hyundai Heavy Industries lost 2.67%.

Despite significant profit-taking activity in Samsung Electronics following its remarkable 23.5% surge this month, optimism surrounding its earnings outlook remains undeterred. "Samsung Electronics has seen robust foreign net buying activity across eleven consecutive sessions, fueling its recent rally. Today's profit-taking is a short-term move," Jae-won Lee commented, maintaining a positive forecast for the stock’s future performance.

U.S. Economic Data Comes Into Focus

Looking ahead, market participants are shifting focus to upcoming U.S. economic releases, including inflation data and third-quarter corporate earnings. According to Lee, these factors will play a prominent role in shaping near-term market direction as traders gauge their implications for global economic trends and risk sentiment.

Kosdaq Index Mirrors KOSPI’s Losses

The secondary Kosdaq index mirrored the KOSPI’s weakness, closing at 835.19, a decline of 17.29 points (-2.03%) compared to its previous close of 852.48. The index opened at 847.67, shedding 4.81 points (-0.56%), but its losses deepened as the trading day unfolded.

Although individual and institutional investors were net buyers in the Kosdaq market, purchasing 92.3 billion won and 2.1 billion won worth of shares, respectively, foreign investors remained net sellers, offloading 77.8 billion won. Their selling activity dragged the index further into negative territory.

Among Kosdaq’s largest-cap stocks, major declines were recorded: EcoProBM fell 4.15%, EcoPro lost 3.59%, and LIG Nex1 dropped 3.00%. Pharmaresearch defied the trend, ending the day with a notable gain of 5.67%, standing out as one of the few exceptions in an otherwise downward market.

FX Market Update: Korean Won Weakens Against the Dollar

The depreciation of the Korean won served as another critical factor impacting investor sentiment. In the Seoul foreign exchange market, the won closed at 1412.4 against the U.S. dollar, representing a steep decline of 11.8 won compared to the prior session’s close of 1400.6 in extended trading.

Market participants now shift their attention to upcoming U.S. inflation figures and corporate earnings reports, which are expected to offer crucial insights and set the tone for the sessions ahead. With global macroeconomic pressures intensifying, all eyes are on these data points as traders navigate an increasingly volatile landscape.