South Korea's stock market has staged a dramatic reversal within a month, triggering a sharp psychological shift among its investors. Last month, when the KOSPI index surged past 9,000 points and eyed the 10,000 mark, a palpable sense of FOMO (fear of missing out) gripped the market. Now, as the index has crashed by over a third from its peak, a new sentiment called JOMO (joy of missing out) is rapidly spreading through the retail investor base, with many expressing relief for having stayed on the sidelines.
On Tuesday, the KOSPI index crashed 10.76%, briefly breaching the 6,000-point barrier during the session. This marked the largest single-day percentage drop since 1998. The cumulative decline from the all-time high of 9,063.84 points reached on June 18 now exceeds 33%. The junior Kosdaq market also fell, dropping below the 700-point mark to its lowest level since April last year. Circuit breakers were triggered in both markets that day. For the year, the KOSPI has triggered circuit breakers eight times, accounting for more than half of the 14 total instances in its history.
The market rout has inflicted heavy losses on retail investors. Both cash reserves on deposit and margin borrowing balances have fallen, and investment sentiment has contracted sharply. Meanwhile, the securities industry is showing divergence, with some analysts viewing extreme pessimism as a contrarian buy signal, while others have raised their year-end KOSPI target to 9,000 points.
Retail Investor Mindset Makes a 180-Degree Shift, JOMO Replaces FOMO
In the first half of this year, as the KOSPI rallied, investors who were not in the market felt immense FOMO pressure. At that time, semiconductor giants like Samsung Electronics and SK Hynix led the charge, with SK Hynix shares briefly nearing the 3 million won mark. Those without holdings felt anxious, spurred on by friends' tales of quick riches. As the market turned, the tone of online investment communities changed rapidly. Posts like "Thank goodness I didn't buy when they said to" and "Those who didn't buy are the winners" have become frequent. A 25-year-old netizen who never invested said, "In the first half of the year, I was envious every time I heard a friend talk about making a car's worth of money from stocks. But then I heard that friend, who was boasting about buying a Genesis, can't even afford a used car now. I feel 'lucky I didn't enter the stock market,'" and added, "I don't plan on trading stocks in the future." Despite being outwardly opposite, FOMO and JOMO share a common origin – they are both a re-evaluation of one's own choices after seeing the outcome.
Crash Data: Frequent Circuit Breakers, Leading Stocks Halved
The intensity of this decline is reflected in the data. The KOSPI has fallen over 33% from its peak, while the KOSDAQ has retreated to 701.33 points, its lowest since April last year. Data from Investing.com shows that South Korea's major index has been the worst-performing among global markets over the past month, a stark contrast to the US S&P 500 which has fallen by about 0.39% over the same period. At the individual stock level, Samsung Electronics has fallen 31% from its high, while SK Hynix has tumbled 38%. According to analysis from Korea Investment & Securities, as of July 27th, 42% of the 872,000 investors holding Samsung Electronics shares were in a loss position, while the loss ratio for the 400,000 investors in SK Hynix was as high as 57%. With the further sharp decline on the 28th, the proportion of investors in the red is expected to rise. On that day, both the KOSPI and KOSDAQ markets triggered sell-side pauses and circuit breakers. For the year, the KOSPI has triggered circuit breakers for the 8th time, contributing to over half of the all-time total of 14 instances.
Funds Accelerate Outflow, 'Ammunition' and Leverage Shrink in Tandem
The depletion of retail investors' 'ammunition' confirms the change in sentiment. Data from the Korea Financial Investment Association shows that as of July 24th, investor deposit money stood at 105.6370 trillion won, a decrease of about 31 trillion won from the peak of 136.8313 trillion won on June 23rd, hitting its lowest level in about five months. Trading volumes have also shrunk, with total trading value in the domestic stock market falling to 34.5238 trillion won, down over 33% from 51.8113 trillion won at the beginning of the month. Leveraged funds are also contracting. The balance of credit transaction financing fell to 32.6717 trillion won, its lowest in about four months, down about 6 trillion won from the peak of 38.6328 trillion won. Between June 24th and July 24th, the total actual reverse transaction amount from forced liquidations was 997.1 billion won, indicating that forced liquidations have been occurring continuously during the sharp decline. Analysts point out that retail investors' pessimistic sentiment and capital outflows could act as a headwind during any future rebound. If investors use any price recovery as an opportunity to sell and cut losses, the index's rebound elasticity will be limited.
Market Divergence: Is Extreme Pessimism a Trap or an Opportunity?
Despite the low sentiment, the securities industry holds mixed views on the outlook. Lee Min-geun, an analyst at Korea Investment & Securities, stated, "Paradoxically, this level of pessimism could also be interpreted as a contrarian signal." If most investors have already sold and the volume of additional selling is reduced, even a small positive catalyst could trigger a rebound. DS Securities, in its second-half outlook report, noted that "even reflecting a 30% decline in earnings per share under the worst-case scenario, the KOSPI remains undervalued" and raised its year-end KOSPI target to 9,000 points. In the semiconductor sector, Morgan Stanley analyst Joseph Moore suggested in a note to investors that this pullback is a buying opportunity. He argued that the shortage of memory semiconductors will intensify further between 2027 and 2028, and predicted that memory prices in the third quarter of this year will rise by at least 25% compared to the previous quarter. "This cyclical downturn is unavoidable, but the current weakness should be viewed as a buying opportunity." For investors still in the market, maintaining judgment amidst a sentiment of JOMO spreading is perhaps the biggest challenge ahead.
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