KOSPI Falls Below 300 Million Shares for the First Time in 4 Years... Stock Market Suffers from a Trading Freeze with No Exit in Sight

Due to Persistent Inflation and Tightening Concerns... Last Year, an Average of 1 Billion Shares Traded Daily
Boxed KOSPI Expected to Continue for Now... Focus on 'Companies with High Export Ratios' with Rising Earnings

[Asia Economy Reporter Lee Seon-ae] The domestic stock market is suffering from a trading freeze. Crushed by persistent inflation and the burden of high-intensity tightening, the KOSPI's daily trading volume has halved, plunging to its lowest level in four years, causing trading to dry up. With the Federal Open Market Committee (FOMC) meeting approaching and expectations that a bear market characterized by simultaneous declines in stock prices and corporate earnings will fully materialize, the cautious sentiment is expected to deepen, showing no signs of trading volume recovery. Since a sharp drop in trading volume itself is regarded as a sign of stock market stagnation, the deterioration of the domestic stock market is inevitable for the time being.

According to the Korea Exchange on the 20th, the trading volume of the KOSPI market on the previous day was 403.93 million shares, barely exceeding 400 million shares. However, excluding over-the-counter trades, it was 395.25 million shares, still below 400 million shares. On the 6th, it even fell below 300 million shares, recording only 294.22 million shares. This is the lowest level in over four years since October 28, 2019, when it was 269.23 million shares. Considering that the average daily trading volume this year has exceeded 600 million shares, this represents a halving. When the trading volume first fell below 300 million shares this year on July 21 (295.62 million shares), it was considered temporary, but since September, it has again fallen below 300 million shares, and even at best barely exceeded 400 million shares, raising concerns about stagnation in the KOSPI market.

The decrease in trading volume itself is regarded as a sign of stock market stagnation. In fact, during the liquidity influx caused by COVID-19, the average daily trading volume in the booming year of 2021 reached 1.03948 billion shares. In 2020, the average trading volume was 895.26 million shares. In 2019, it was 470.72 million shares, and in 2018, 397.97 million shares.

Looking at the trading value, signs of capital outflow from the stock market are also clearly evident. The trading value of the KOSPI market on the previous day was 6.8859 trillion KRW. The average daily trading value this month is only 7.6328 trillion KRW, about half of the 14 trillion KRW recorded in September last year.

The problem is that recovery in trading volume seems distant. Currently, investors’ cautious sentiment is strong. Recently, the rapid rise in the won-dollar exchange rate has further dampened investment sentiment, and concerns about prolonged high-intensity tightening by the Federal Reserve (Fed) are significant. A financial investment industry official noted, "Due to simultaneous large-scale interest rate hikes by major countries including the U.S., concerns about economic slowdown have deepened, lowering corporate earnings forecasts, and there are worries that the stock market’s downward trend may continue, accelerating capital outflows from the stock market."

According to Mirae Asset Securities, the earnings forecast for the Korean stock market has fallen by 2.2% compared to last month. This year's operating profit forecast also declined by 0.4% compared to last week, accelerating the downward trend.

Lee Jae-man, a researcher at Hana Securities, said, "The KOSPI net profit forecast for this year is 175 trillion KRW, expecting an 8% decrease compared to the previous year, and customer deposits have decreased from 70 trillion KRW at the beginning of the year to 53 trillion KRW as of September, making it difficult to expect a KOSPI level-up now," adding, "Given the high possibility that the KOSPI will form a box range, strategies considering the current macro situation should be established." He further stated, "It is an effective time to respond with strategies focusing on companies with high or increasing export ratios, companies maintaining or improving operating profit margins at high levels, and companies with high earnings coverage ratios and cash generation capabilities (FCF)."

This content was produced with the assistance of AI translation services.