KOSPI buyback support ends by October as retail buying drops 90%

Samsung Electronics and SK Hynix buybacks, KOSPI's sole net-buying support, will run dry by mid-October — a month before official deadlines — Goldman Sachs warns.

The two chipmakers' front-loaded execution means their combined quotas will be consumed between late September and mid-October, well ahead of the November 21 and November 19 expiry dates, according to a September 3 report by Goldman Sachs analyst Chris Cha.

Retail net buying collapsed 90 percent from 54.5 trillion won in June to 5.4 trillion won in August, while foreign and local institutions also recorded net selling. On a recent trading day, the two companies' buybacks contributed roughly $1.2 billion in net buying — more than 98 percent of that day's "other corporates" category inflows — and have sustained net buying for 12 consecutive trading days.

Once buyback support disappears, KOSPI's trajectory will depend almost entirely on foreign capital flows and the won's exchange rate, Goldman said. The won has appreciated 12.9 percent from its mid-year low, with the dollar-won rate falling from 1,561.50 to 1,359.15, providing more favorable conditions for global asset reallocation into Korean equities.

Retail Buying Collapses 90% as Margin Balances Drain

Korean retail investors, once the primary driver of KOSPI's first-half rebound, have shifted from aggressive buy-the-dip behavior to a conservative loss-avoidance and rebound-trimming strategy. Systematic retail buying is now concentrated below the 6,500 level on KOSPI, while the index faces resistance near 7,000 as retail investors unwind positions at breakeven.

Brokerage margin balances have remained below 100 trillion won for a full week, indicating that retail deployable capital is approaching exhaustion. The shift toward safe-haven assets is visible in deposit data: time deposit balances at Korea's top five commercial banks surpassed 1,000 trillion won for the first time, with 55.83 trillion won of combined inflows in July and August.

The leveraged ETF boom that previously attracted heavy retail participation has also ended. Regulators now require investors to complete a five-hour online course before qualifying for leveraged trading, shutting out a large segment of momentum chasers.

Foreign Flows and Won Strength Become the Swing Variable

With retail buying exhausted and the buyback window closing, foreign net inflows have become the most critical structural variable for KOSPI's second-half trajectory. Foreign net selling has moderated from 44.7 billion won and 48.6 billion won in May and June to roughly 9.9 billion won and 10 billion won in July and August, indicating that selling momentum has weakened.

Goldman Sachs outlined three execution strategies: trim positions near the 7,000 level on KOSPI, where retail breakeven selling pressure is expected to form significant resistance; position early for elevated volatility after buybacks conclude in October; and track foreign capital rotation among semiconductor leaders to capture structural opportunities from won appreciation and stabilizing foreign net selling trends.

The next two months represent a critical observation window for investors in South Korean equities. The fading of buyback support and the direction of foreign capital flows will determine whether KOSPI can hold current levels without retail momentum, or whether a sharper correction lies ahead.

This article is for informational purposes only and does not constitute investment advice.