The South Korean stock market is experiencing a notable downturn in trading activity, with average daily turnover on the KOSPI falling to approximately 20 trillion won (about $14.9 billion) in September, marking the lowest monthly figure for 2026. This represents a 22.4% decrease from August's average of 25.846 trillion won ($19.2 billion) and is less than half of the 50 trillion won ($37.2 billion) recorded during the market surge in May and June. The KOSDAQ market has seen an even steeper decline, with daily average trading value dropping below 5 trillion won ($3.7 billion) to 4.9929 trillion won, a 33.9% decrease from last year's daily average.
This contraction follows a sharp market correction in July, which saw the KOSPI drop from a peak of 9,110 in June to around 5,500. While large share buybacks by companies like Samsung Electronics and SK Hynix helped prevent the index from falling below 6,000 in August, it remained confined within a 6,200-6,800 range. Foreign investors have been net sellers for four consecutive months, offloading 10.17 trillion won in August alone. Investor deposits have also fallen below 100 trillion won, with over 30 trillion won withdrawn in two months, indicating weakening market strength.
Investor sentiment is largely influenced by concerns over potential US interest rate hikes, with Federal Reserve Chairman Kevin Warsh's hawkish comments increasing the probability of a September rate hike to 59.7%. Analysts from LS Securities, such as Shin Joong-ho, suggest that even if the FOMC holds rates, market rates may not stabilize quickly, citing global economic indicators coming off their peaks. Despite these concerns, some analysts, including Park Hye-ran of Samsung Securities, believe that current rate hike fears are excessive and that the market may return to an earnings-led phase, particularly in sectors like machinery and electronic equipment, supported by strong semiconductor export growth.
The decline in trading volume is also viewed by some as a normalization after an unusually overheated first half of 2026. Kim Seok-hwan, an analyst at Mirae Asset Securities, noted that the recent tumble in daily turnover reflects a normalization of transactions that had become excessively high. However, securities firms have lowered their market expectations, with Korea Investment & Securities revising its KOSPI ceiling to 7,400 from an earlier projection of 11,000, indicating that a trend reversal is still some time away.
