“Accounts are melting” ... KOSDAQ (Korea Securities Dealers Automated Quotations) investors have lost all the gains they made this year

[Financial News] The KOSDAQ index has given back all its gains for the year and fallen nearly 14% from the start of the year. Retail investors net-bought more than 3 trillion won in August and September alone, when the index fluctuated around the 800 level, but this month’s sharp decline has increased their loss burden. With forced liquidations also on the rise, warning signs have emerged over the ability of retail investors—who had been buying the dip—to make further purchases.
The KOSDAQ index closed at 808.89 on the 19th, up 14.11 points (1.78%) from the previous trading day. It rebounded for a second consecutive trading session after rising 4.46% on the 16th, but remained 12.6% below its year-end closing level of 925.47. In effect, anyone who invested by tracking the index at the end of last year would have given back all their gains for the year and lost some of their principal as well.
The KOSDAQ index fell for six consecutive trading sessions from the 7th through the 15th. It dropped 17.3%, from 919.92 on the 6th, just before the decline, to 760.82 on the 15th. It plunged 7.65% in a single day on the 15th.
Investors who entered the market near the peak have been hit harder. The index has fallen 34.8% from 1,226.18 on April 27, its highest closing level of the year. An investment of 100 million won tracking the index at that time would now be worth about 65.15 million won. From its current level, the index would need to rise about 53.5% to regain its previous peak.
A securities industry official said, “The larger the loss, the greater the gain needed to recover the principal,” adding, “Investors who bought at the peak may need considerable time to recoup their losses, even if the index rebounds.”
Retail investors made large-scale purchases in the KOSDAQ market after the summer. Their cumulative net purchases in August and September totaled 3.3281 trillion won, with funds flowing in as the index mostly moved around the 800 level. Even as the index fell for six consecutive trading sessions from the 7th to the 15th of this month, retail investors net-bought 887 billion won. They remained net buyers in the falling market, but the index continued to slide.
The major stocks bought by retail investors were also unable to avoid sharp declines. JUSUNG Engineering, the top stock by retail net purchases last week, saw an inflow of 220.4 billion won, but its share price fell 21.3% over the week. SIMMTECH, which retail investors net-bought for 85 billion won, fell 26.7%, while ROBOTIS, with net purchases of 52.6 billion won, dropped 22.7%. Retail investors also net-bought 28.5 billion won of EcoPro and 28.3 billion won of EcoPro BM, but their share prices fell 11.5% and 17.0%, respectively.
Retail investors were net sellers of 171.5 billion won over the two days, selling 74.8 billion won on the 15th and 96.6 billion won on the 16th. On the 19th, however, they switched back to net buying, purchasing 92.8 billion won. Buying in anticipation of a rebound and selling to reduce holdings are pulling in opposite directions.
The key question is whether investors have enough funds to support further purchases. Na Seung-doo, an analyst at SK Securities, said, “In the short term, retail investor flows could help support stock prices on the downside, but it seems necessary to assess whether they still have the capacity to buy further on dips, given factors such as a reduction in margin loans.”
The increase in forced liquidations to the 80-billion-won range is also a concern. The actual amount of forced liquidations due to unpaid balances from brokerage transactions surged about 14-fold, from 6.359 billion won on the 8th to 89.336 billion won on the 14th. It remained in the 80-billion-won range for a second consecutive day on the 15th, at 80.498 billion won.
An investment industry official warned, “Investors who cannot raise settlement funds or meet collateral maintenance requirements may have their shares forcibly sold even if they want to wait for a rebound.” The official added, “If forced selling triggers further declines and leads to collateral shortfalls in other accounts, selling pressure could intensify.”
[email protected] Choi Doo-sun Reporter