KOSPI Slumps as Buying Momentum Fades

The KOSPI benchmark index experienced a 20.7% decline over seven sessions through Thursday, signaling a significant reduction in market liquidity. Unlike previous volatility events, domestic institutional support has failed to materialize, as pension funds face limited allocation capacity and major corporate buyback programs near completion.

Retail investor participation remains constrained by losses incurred during earlier market downturns. Furthermore, the shift in investor behavior toward leveraged exchange-traded funds (ETFs) introduces potential for increased volatility, as daily rebalancing requirements may exacerbate downward price pressure.

Short-covering activity, which previously provided a floor for the market, is currently limited by historically low short interest levels. While current valuation metrics suggest the market is trading near historical averages, persistent external risks and diminished liquidity buffers continue to obscure the timing of a potential recovery.