Investors Flee Flagging Stock Market

The bears have returned to the Korean stock market. Daily stock transactions on the benchmark Korea Composite Stock Price Index fell to the lowest in two years and 11 months, as did investors' deposits.

The number of small investors using mobile apps has plummeted 36 percent so far this year as the air went out of the bubble.

According to the Korea Exchange, transactions on the KOSPI last Monday totaled just W5 trillion, the lowest since W4.64 trillion at the start of the coronavirus pandemic in January 2020 (US$1=W1,275).

Transaction volume fell by a quarter compared to the year's peak of W20.55 trillion in January. On average this month, daily transactions amounted to just around W6 trillion, or half the levels seen early this year.

Deposits in securities accounts fell to W45.1 trillion on Monday, the lowest this year, according to the Korea Financial Investment Association. They have fallen below W50 trillion this month or around 30 percent from the start of this year.

One industry insider said, "Vitality has disappeared in the stock market and the atmosphere is lethargic." Stock and bond transaction amounts typically drop at the end of the year as institutional investors shun reflections of profits or losses when they close their books. But the trend has become even more pronounced this year due to the slow economy.

Retail investors are still leaving in droves due to repeated stock market crashes. According to Mobile Index, the number of investors using the mobile apps of the top five brokerages stood at just 9.21 million last month, down 36 percent from January.

Analysts expect the trend to worsen in the New Year because the U.S. benchmark interest rate is expected to rise to five percent while weak private consumption will exacerbate the situation.

"We estimate the KOSPI to bottom out at 2,050 points, but no rebound is likely until the second quarter of next year," said Lee Kyung-min at Daeshin Securities.