The domestic stock market, which had shown extreme volatility, has recently calmed. However, analysts say the investment fervor of individual investors has cooled as well. With the KOSPI trapped in a range, more investors are turning their eyes overseas.
According to the Korea Exchange (KRX) on the 30th, last month the KOSPI rose or fell more than 3% on 14 out of 22 trading days (64%), but that number fell sharply to eight days this month. This figure, which was in the single digits early this year, jumped to 11 days in June and 14 days in July, when trading in single-stock leveraged products was active.
The change is even more pronounced if the threshold for swings is raised to 5% or more. There were seven and 10 such days in June and July, respectively, but it fell to three days this month. The KOSPI 200 volatility index (VKOSPI) also soared to 97.99 at the end of June, but fell by nearly half to 50.08 as of the 28th.
As index moves settled, the number of market stabilization mechanisms triggered also fell. The sidecar, which temporarily halts program buy and sell quotes when volatility expands, was triggered 10 times in June and 15 times in July on the main board, but only five times in August.
The stronger measure, the circuit breaker, also increased from twice in March to three and four times in June and July, respectively, but has not been activated once this month. A circuit breaker is a market stabilization mechanism that temporarily halts trading if the KOSPI index remains down 8% or more from the previous close for at least one minute.
Volatility has eased, but the fervor of individual investors has cooled. According to the exchange, the KOSPI's average daily trading volume this month was 317.29 million shares, and the average daily trading value was 25.7568 trillion won, falling to the lowest level of the year.
Turnover of listed shares also fell to 0.54% this month, the lowest level of the year. This means that out of every 1,000 listed shares, about 5.4 shares were traded per day on average. As losses piled up during the index's plunge and the rebound remained unclear, new investments appear to be slowing.
The KOSPI index surged intraday to 9,385.59 in June, fueling expectations for 10,000 points, but then fell sharply to the 5,200 level intraday on the 29th of last month. It has recovered substantially this month, but still has not crossed the 7,000 level. The last time the KOSPI closed above 7,000 was on the 23rd of last month.
Investor deposits, a form of cash on the sidelines for the stock market, are also shrinking. According to the Korea Financial Investment Association, investor deposits, which neared 140 trillion won in early June, fell to 96.7091 trillion won as of the 28th of last month, slipping below 100 trillion won.
Kwon Beom-seok, a Samsung Securities analyst, said, "All individual supply-demand indicators, including deposits and margin loan balances, are on a downward trend," adding, "The 'individual buying sentiment index,' designed by combining market liquidity indicators, has been trending down since June and, assuming mean reversion, suggests that individual selling could continue."
As the domestic stock market struggles to break out of its range, investors are turning overseas. According to the Korea Securities Depository (KSD), as of the 28th, domestic investors' holdings of U.S. stocks stood at $186.7 billion, up 14% from $163.6 billion at the end of last month.
Individual investors made net purchases of U.S. stocks worth $7,038.79 million (about 9.7135 trillion won) over roughly two months from the 1st of last month to the 27th of this month. During a similar period—from the 1st of last month to the 28th of this month—individuals made net purchases of 8.7532 trillion won on the main board, about 1 trillion won less.
In the securities industry, the recent strength of the won is expected to keep the fervor for overseas stock investment going for the time being.