Confused KOSPI, Foreigners and Individuals Betting on Different Indexes

[Asia Economy Reporter Minji Lee] Amid uncertainty over interest rates and concerns about economic slowdown, the KOSPI has been moving sideways around the 2450 level, with foreign investors and individual investors betting on different index directions, resulting in a tense tug-of-war.

According to the Korea Exchange on the 19th, from the 1st to the 18th of this month, the product most heavily net purchased by individuals was the ‘KODEX 200 Futures Inverse 2X,’ with a total amount reaching 442.1 billion KRW. This product yields twice the profit when the KOSPI declines, indicating that individuals believe a KOSPI downturn is imminent. They also bought the 1x inverse product; net purchases of the ‘KODEX Inverse’ product amounted to 54.6 billion KRW. As the KOSPI surged more than 8% this month, reaching the psychological support level of 2500, individuals forecasted that the KOSPI would soon enter a bearish phase.

Looking at the KOSPI trend in the second half of this year, it has repeatedly risen and fallen without finding a clear direction. The KOSPI hovered around the 2700 level in May, dropped to the 2300 level in July, then seemed to rise past 2500 the following month, but plunged sharply to the 2100 level in September, disappointing individuals who were hoping for a recovery in returns.

On the other hand, foreign investors’ sentiment is quite different. They have been actively purchasing products that bet on the KOSPI’s rise. Foreign investors bought the KODEX 200 product, which profits when the KOSPI rises, as their third-largest purchase after LG Energy Solution (552.9 billion KRW) and Samsung Electronics (375.5 billion KRW), with a total amount of 270.2 billion KRW. After the U.S. October CPI (Consumer Price Index) release earlier this month, the dollar index, which had been strong, dropped from 114 points to the low 100 points, leading to expectations of improved short-term supply and demand conditions. Looking at institutional net purchases, the KODEX Leverage product (310.5 billion KRW) was the second most net purchased item after Samsung Electronics (384.0 billion KRW), and the KODEX KOSDAQ150 Leverage (155.8 billion KRW) was also recorded at a significant scale. However, it should be noted that institutional investors often buy these products to fulfill liquidity provider (LP) roles.

Experts believe that in a situation where interpretations of the economy and monetary policy direction are divided, investing based on index direction will not yield significant benefits. They judge that both downside and upside are limited. Cho Byung-hyun, head of investment strategy at Daol Investment & Securities, said, “It is difficult to see the market forming a mid- to long-term upward trend supported by a fundamental cycle, and concerns about worsening demand will increase.” He added, “However, considering interest rate volatility, the situation is more favorable compared to before October.”

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