With South Korea’s KOSPI pushed down to the 5,400 level, daily trading value on the South Korean stock market has collapsed to its lowest level of the year. Funds from individual investors who bought at the peak are now locked in by the sharp decline, and growing doubts about the profitability of artificial intelligence (AI) capital spending have created a “trading cliff” in which neither buyers nor sellers are stepping forward.
According to the Korea Exchange, KOSPI trading value on Oct. 26 came to 12.0108 trillion won (approximately $9.1 billion), the smallest this year. After hovering above 20 trillion won early in the year, trading value fell below that mark for the first time in mid-August and has struggled to recover since. Volume that day totaled 190.46 million shares, falling below 200 million for the first time this year. The KOSPI closed at 5,469.47, down 80.83 points (1.46%) from the previous session, slipping to the 5,400 level for the first time in about six months since April 7 (5,494.78).
The contraction is also clear in monthly figures. Average daily KOSPI trading value peaked at 50.3471 trillion won (approximately $38.0 billion) in June, then fell to 36.8754 trillion won (approximately $27.8 billion) in July, 25.846 trillion won (approximately $19.5 billion) in August, 21.3606 trillion won (approximately $16.1 billion) in September and 20.08 trillion won (approximately $15.2 billion) in October (Oct. 1–26), declining for four consecutive months. Compared with June, that is a drop of nearly 60% in about two months.
Note: October figures are based on month-to-date data.
Cash sitting on the sidelines is drying up as well. Investor deposits stood at 88.6841 trillion won (approximately $66.9 billion) as of Oct. 22, according to the Korea Financial Investment Association, falling for eight consecutive trading days and dropping to their lowest level since Jan. 13 (88.0489 trillion won, approximately $66.4 billion), this year’s low.
Settlement indicators have also retreated. According to the Korea Securities Depository, average daily stock settlement value in the third quarter was about 8.8 trillion won (approximately $6.6 billion), down 12.4% from the previous quarter and ending a streak of gains that began in the third quarter of last year.
Market rigidity is cited as the biggest cause of the trading vacuum. During June alone, individual investors net bought 42 trillion won (approximately $31.7 billion) worth of KOSPI shares, when the index was moving between 7,400 and 9,100. Analysts say the subsequent plunge has left funds that entered at the peak stuck in loss territory, unable to either sell or make new purchases.
Caution over AI investment has also deepened the slump. This month, concerns about the financial health of neocloud company CoreWeave emerged, and then Meta’s third-quarter results showed free cash flow (FCF) turning negative, spreading doubts over whether the company can raise the funds needed for large-scale AI capital spending. Huh Jae-hwan, a managing director at Eugene Investment & Securities, said, “The sharp declines in shares such as Samsung Electronics and SK Hynix, which traded actively in the first half, have left investors with large losses, and they are unable to sell or buy anew.” He added, “The cooling of the AI boom on profitability concerns has also had a direct impact on the drop in trading value.”
The decline in trading value is also a direct blow to brokerage earnings. According to Hana Securities, combined net profit attributable to controlling shareholders at five brokerages—Kiwoom Securities, Samsung Securities, NH Investment & Securities, Korea Financial Group and Mirae Asset Securities—is estimated at 1.1 trillion won (approximately $830.1 million) for the third quarter, down 44.9% from a year earlier. That is a 76.6% plunge from the previous quarter and below the market consensus of 1.5 trillion won (approximately $1.1 billion). Hana Securities analyst Ko Yeon-soo said, “The decline in trading value and weaker trading gains amid rising interest rates will weigh on earnings,” adding, “If South Korean stock market trading value stays at current levels in the fourth quarter, there is room for further earnings deterioration.”
Market participants see little chance of a quick recovery in trading. They say investors need to confirm the sustainability of AI investment through earnings from major Big Tech companies such as Microsoft, while caution is deepening ahead of the U.S. Federal Reserve’s October Federal Open Market Committee (FOMC) meeting. In addition, international oil prices above $100 a barrel (~130,000 won) on Middle East tensions have rekindled concerns about high inflation and high interest rates, further dampening sentiment.
Concerns about the supply-demand vacuum are also significant. Kim Dae-jun, an analyst at Korea Investment & Securities, said, “With a strong desire to check Big Tech earnings at home and abroad and various events this week, the wait-and-see mood is likely to extend for the time being.” Lee Jae-won, an analyst at Yuanta Securities, said, “Large-scale foreign selling is calming, but there are no buyers to absorb it,” adding, “With the end of share buybacks combined with falling trading value and customer deposits, the market’s ability to absorb price shocks has weakened.”
The trading slump is a burden because it could shake the index’s direction itself. When trading value falls, even small amounts of selling can send the index swinging sharply, and in a rebound, a lack of liquidity limits upward momentum. Kang Hyun-ki, an analyst at DB Securities, said, “I place more weight on the possibility that the KOSPI will move in a box range, fluctuating around current levels, rather than resuming its rise,” and recommended diversifying into undervalued value stocks and high-dividend stocks that pay steady dividends.