"Lost Without a Leader: When Will the KOSPI Break Out of Its Sideways Market?"

All Major Investors Turn Net Sellers This Month
Theme Stocks Resurface as "Jobangwon" Loses Market Leadership

The KOSPI, which had just reclaimed the 3,200 level after the major event of the South Korea-U.S. summit, reversed course only a day later, raising concerns in the market. With no clear buyers or leading stocks to drive the index, some analysts suggest that investors should prepare for a prolonged period of sector rotation.

According to the Korea Exchange on August 27, the KOSPI closed at 3,179.36 the previous day, down 0.95%. Individual investors bought 847.3 billion won worth of stocks, turning net buyers for the first time in five trading days. However, foreign investors and institutions sold 684.5 billion won and 264.2 billion won worth of stocks, respectively, putting downward pressure on the index. The gains made on August 25, when the index recovered the 3,200 level, were erased in just one day. In August, individuals, foreigners, and institutions have all been net sellers, offloading 119.4 billion won, 1.015 trillion won, and 602.5 billion won, respectively, and effectively chanting 'Sell Korea' in unison.

Although the South Korea-U.S. summit, which had raised market expectations, ended on a positive note, it failed to provide momentum for the index to rise further. Notably, even though U.S. President Donald Trump mentioned the 'MASGA (Make American Shipbuilding Great Again)' project and extended another invitation to the Korean shipbuilding industry, shipbuilding stocks saw this as a case of news-driven momentum fading and dropped by more than 3%. The declines of KS Industry (-10.02%) and Hanwha Ocean (-6.18%) were particularly notable. HD Hyundai signed a memorandum of understanding (MOU) on the same day to establish a joint South Korea-U.S. shipbuilding investment program, earning the title of 'MASGA No. 1 Agreement,' yet its gains were limited to just over 1%.

As the so-called 'Jobangwon' stocks (shipbuilding, defense, and nuclear power) that had led a sharp upward curve in the second quarter relinquished their leadership, theme stocks driven by one-off news are once again making waves with rapid fluctuations. On this day, Monami hit the upper price limit after news spread that President Trump had shown interest in the pen used by President Lee Jaemyung during the summit and received it as a gift. Although the pen was actually produced by the domestic handmade fountain pen maker Jennaile, it is known to have been made using a modified refill from the commercially available Monami Name Pen.

However, some analysts believe that the South Korea-U.S. summit will not remain a short-term catalyst for stock prices but will serve as a driving force for a mid- to long-term upward trend. Um Kyungah, a researcher at Shin Young Securities, commented, "Although there were no immediate large-scale orders or investment announcements at the summit, it was confirmed that, given the difficulty of quickly rebuilding the U.S. shipbuilding industry, the strategic role of Korean shipbuilders will inevitably grow." She added, "Since President Trump also expressed his intention to visit Korea, the timing of specific discussions on shipbuilding has merely been postponed, not canceled."

There is also a view that the KOSPI, as it digests supply and demand around the 3,200 level, is in the process of alleviating valuation burdens and preparing for a 'second rally.' Lee Kyungmin, a researcher at Daishin Securities, noted, "During the second quarter earnings season, the gap between expectations and reality is being adjusted, and sector and stock-specific rotations are unfolding, easing overheating." He recommended focusing on undervalued stocks relative to earnings, as well as industries that have seen excessive declines, such as healthcare, software, steel, nonferrous metals and lumber, retail (distribution), hotels and leisure, banks, and securities.

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