Korean stocks experienced a broad-based decline on May 8, with all 50 KOSPI sectors and 39 KOSDAQ sectors recording negative returns. The market-wide selloff was driven by concentrated retail investor flows into leveraged exchange-traded funds (ETFs) rather than individual stocks, weakening buying support across the broader market. Investor deposit funds decreased by over 27 trillion won from early June to the 7th, reflecting deteriorating market sentiment and reduced standby capital for stock purchases.
All 89 Korean Stock Sectors Declined on May 8
According to KRX Data Statistics System, all 50 KOSPI sectors and 39 KOSDAQ sectors recorded negative returns on May 8. In the KOSPI market, KOSPI 200 Heavy Industry fell 7.58%, followed by KOSPI 200 Industrials at -7.38% and KOSPI 200 Construction at -7.33%. In the KOSDAQ market, Technology Growth Companies declined 7.34%, KOSDAQ 150 Industrials fell 6.80%, and KOSDAQ 150 Healthcare dropped 6.71%.
The selloff extended to individual stocks. In the securities market, only 125 stocks rose while 765 declined. In the KOSDAQ market, 242 stocks advanced compared to 1,451 that fell.
Foreign investors' bargain hunting was insufficient to support the market. On May 8, foreigners net bought 474.2 billion won in the securities market, while individuals and institutions net sold 394.1 billion won and 135.7 billion won respectively. In the KOSDAQ market, foreigners net purchased 337 billion won, but individuals and institutions net sold 197 billion won and 137.5 billion won respectively.
A securities industry official stated, "Foreigners engaged in bargain hunting on the previous day, but it was not aggressive buying sufficient to lift the market. As retail funds are concentrated in leveraged products, buying support for general stocks has weakened, which is a recent market characteristic. With weakened buying entities to support general stocks, the structure has become one where selling spreads rapidly across the entire market even on minor negative news."
Retail Investors Concentrated 2.35 Trillion Won in Leveraged ETFs During Period 1-8
Retail investor funds flowed into single-stock leveraged ETFs rather than individual stocks during the period from the 1st to the 8th. Individuals net purchased 563.8 billion won of 'KODEX Samsung Electronics Single Stock Leverage' and 208.6 billion won of 'TIGER Samsung Electronics Single Stock Leverage'. They also bought 1.1092 trillion won and 469.3 billion won worth of 'KODEX SK Hynix Single Stock Leverage' and 'TIGER SK Hynix Single Stock Leverage' respectively.
However, during the same period, Samsung Electronics and SK Hynix stock prices fell 6.25% and 5.68% respectively. Accordingly, related single-stock leveraged ETFs all recorded double-digit losses. Leveraged ETFs are structured to track twice the daily return of the underlying asset, so losses can expand as volatility increases.
Investor Deposit Funds Decreased 27 Trillion Won from Early June to the 7th
Market sentiment contraction is also confirmed in standby funds. According to the Korea Financial Investment Association, investor deposit funds decreased from 139.6947 trillion won in early June to 112.3259 trillion won on the 7th. Buying funds waiting in the market decreased rapidly by more than 27 trillion won in about a month.
Analysts Attribute Market Volatility to Sentiment Over Fundamentals
Securities firms view that market volatility may continue for the time being, as the recent plunge was heavily influenced by investor sentiment and supply-demand factors rather than corporate earnings. Han Ji-young, a researcher at Kiwoom Securities, stated, "The recent stock market has seen investment sentiment weakened due to consecutive adjustments in semiconductor stocks centered on the three major memory companies, and the suspension of the US-Iran ceasefire could continue to burden the stock market going forward. A market where investment sentiment and supply-demand dominate rather than corporate earnings or fundamentals continues." She added, "Market volatility expanded as technical selling flowed in with the KOSPI breaking below the 60-day line and KOSDAQ breaking below the 200-day line overlapping."
FAQ
Q: What happened to Korean stocks on May 8?
A: All 50 KOSPI sectors and 39 KOSDAQ sectors recorded negative returns on May 8. KOSPI 200 Heavy Industry fell 7.58%, the largest decline, while KOSDAQ Technology Growth Companies dropped 7.34%.
Q: How much did retail investors put into leveraged ETFs during the period from the 1st to the 8th?
A: Retail investors net purchased 563.8 billion won of KODEX Samsung Electronics Single Stock Leverage, 208.6 billion won of TIGER Samsung Electronics Single Stock Leverage, 1.1092 trillion won of KODEX SK Hynix Single Stock Leverage, and 469.3 billion won of TIGER SK Hynix Single Stock Leverage during the period from the 1st to the 8th.
Q: Why did the market decline despite foreign buying on May 8?
A: On May 8, foreigners net bought 474.2 billion won in the securities market, but this was not aggressive enough to lift the market. Retail funds concentrated in leveraged products weakened buying support for general stocks, causing selling to spread rapidly across the market.
