South Korea's stock market has experienced a dramatic reversal within a month, triggering a significant shift in investor sentiment. When the KOSPI index broke through 9000 points last month, eyeing the 10,000-point mark, a FOMO (fear of missing out) sentiment, with investors feeling "I'm the only one not on board," pervaded the market. However, as the index subsequently plunged over 30%, a JOMO (joy of missing out) psychology, characterized by "I'm glad I didn't get in," is rapidly spreading among retail investors.
On Tuesday, the KOSPI index plummeted 10.76%, marking its largest single-day drop since 1998. The cumulative decline from its historic high of 9063.84 points on July 18 has exceeded 33%. The tech-heavy KOSDAQ index also fell below the 700-point threshold on the same day, hitting its lowest level since April last year. Both markets triggered circuit breakers, with the KOSPI experiencing its 8th circuit breaker this year, more than half of the total 14 instances in its history.
The market crash has inflicted heavy losses on retail investors, with both idle cash and margin loan balances declining sharply, leading to a significant contraction in investment sentiment. Meanwhile, a divergence of opinion has emerged in the securities industry: some analysts view the extreme pessimism as a contrarian buy signal, while other institutions have raised their year-end KOSPI target to 9000 points.
Retail Investor Sentiment Makes a 180-Degree Turn, JOMO Replaces FOMO
In the first half of this year, as the KOSPI surged, investors who had not yet entered the market felt intense FOMO pressure. At that time, semiconductor giants Samsung Electronics Co Ltd and SK Hynix Inc led the rally, with SK Hynix's stock price briefly approaching the 3 million won mark. Those without holdings were anxious, spurred on by friends' "get-rich-quick stories."
As the market trend reversed, the tone in online investment communities quickly shifted. Posts like "I'm so glad I didn't buy when they said to buy" and "Those who didn't buy are the winners" became frequent. A 25-year-old netizen who never invested said, "In the first half of the year, I felt envious every time I heard a friend say they made enough from stocks to buy a car. But later, I heard that the friend who was boasting about buying a Genesis now can't even afford a used car. So now I feel 'lucky I didn't get into the stock market,' and I have no plans to trade stocks in the future."
FOMO and JOMO, while seemingly opposite, share a common origin—both are a re-evaluation of one's own choices after the outcome is known.
Crash Data: Frequent Circuit Breakers, Leading Stocks Halved in Value
The severity of this decline is clearly reflected in the data. The KOSPI has fallen over 33% from its peak, and the KOSDAQ has retreated to 701.33 points, its lowest since April last year. According to data from Investing.com, South Korea's major indices have been the worst performers among global major markets over the past month, starkly contrasting with the S&P 500 index, which fell about 0.39% over the same period.
At the individual stock level, Samsung Electronics Co Ltd has fallen 31% from its peak, while SK Hynix Inc has declined 38%. According to analysis from Korea Investment & Securities, as of the 27th, 42% of the 872,000 investors in Samsung Electronics were in losses, and the loss ratio for the 400,000 investors in SK Hynix was as high as 57%. Following the further sharp drop in stock prices on the 28th, the proportion of loss-making investors is expected to rise further.
On that day, the KOSPI and KOSDAQ markets both triggered sell-side halts and circuit breakers. This year, the KOSPI has triggered circuit breakers for the 8th time, accounting for more than half of the total 14 instances in history.
Funds Accelerate Withdrawal, 'Ammunition' and Leverage Shrink Simultaneously
The depletion of retail investors' "ammunition" confirms the shift in sentiment. According to data from the Korea Financial Investment Association, as of the 24th, investor deposits stood at 105.6370 trillion won, a decrease of about 31 trillion won from the peak of 136.8313 trillion won on the 23rd of last month, hitting their lowest level in about five months. Trading volumes have also contracted significantly. The total trading volume in the domestic stock market was 34.5238 trillion won, down over 33% from 51.8113 trillion won at the beginning of this month.
Leveraged funds are also contracting. The balance of credit transaction financing fell to 32.6717 trillion won, the lowest in about four months, down about 6 trillion won from the peak of 38.6328 trillion won. Between June 24 and July 24, the total amount of forced liquidation through actual reverse transactions reached 997.1 billion won, indicating that forced liquidations have been ongoing during the sharp decline.
Analysts point out that retail investors' pessimism and capital outflows may pressure the market during a future rebound—if investors take the opportunity to sell off their holdings to reduce losses whenever stock prices rise, the index's rebound elasticity will be limited.
Market Divergence: Is Extreme Pessimism a Trap or an Opportunity?
Despite the low sentiment, opinions within the securities industry are divided on the market's outlook.
Lee Min-keun, an analyst at Korea Investment & Securities, stated, "Ironically, this level of pessimism could also be interpreted as a contrarian signal." If most investors have already completed selling and the potential for additional selling is reduced, even a small positive catalyst could trigger a rebound.
In its second-half outlook report, DS Securities noted, "Even reflecting a 30% decline in earnings per share under the worst-case scenario, the KOSPI is still undervalued," and raised its year-end KOSPI target to 9000 points.
In the semiconductor sector, Morgan Stanley analyst Joseph Moore argued in an investor report that this correction presents a buying opportunity on the dip. He stated that the shortage of memory semiconductors will intensify further in 2027-2028 and predicted that memory prices in the third quarter of this year will rise at least 25% from the previous quarter. "This downward cycle is inevitable, but the current weakness should be viewed as a buying opportunity," he said.
For investors still in the market, maintaining judgment amidst the spreading JOMO sentiment may be the biggest test right now.
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