Local retail investors experienced significant losses from Korean shares in the third quarter while foreign investors fared relatively well amid the Kospi’s bearish trend in the period, market data showed on Thursday.

According to the Korea Exchange, the most purchased stock by South Korean retail investors from July to September was Samsung Electronics, the world’s largest memory chipmaker, with net purchases totaling 7.82 trillion won ($5.9 billion).

Following Samsung, SK hynix, the country’s No. 2 chipmaker, ranked second with net purchases of 2.66 trillion won, while carmaker Kia was third at 570 billion won.

Other top purchases by Korean individual investors included Hyundai Motor, Yuhan, LG Chem, Hanmi Semiconductor, Isu Petasys and Samsung SDI.

However, the struggles of the semiconductor sector weighed heavily on them. Printed circuit board manufacturer Isu Petasys recorded the steepest decline at 37.7 percent, followed closely by chip equipment supplier Hanmi Semiconductor, which fell 37.1 percent. SK hynix and Samsung Electronics posted losses of 26.2 percent and 24.5 percent, respectively, during the period.

Overall, the 10 most-purchased stocks by Korean retail investors lost an average of 9 percent, underperforming the Kospi’s 7 percent decline.

In contrast, foreign investors posted strong returns, favoring sectors expected to benefit from interest rate cuts, including biotech, secondary batteries, and gaming.

Bio giant Samsung Biologics led foreign purchases with net inflows of 936 billion won, also emerging as the top performer with a gain of 34.4 percent.

Other foreign favorites included LG Electronics, Alteogen, Samsung Heavy Industries, Krafton, LG Energy Solution, Hyundai Motor and Hyundai Rotem.

Aside from LG Electronics and Hyundai Motor, eight of the top 10 foreign picks posted gains, with Hyundai Rotem and LG Energy Solution among the strongest, rising 31.4 percent and 27 percent, respectively. On average, the 10 most-purchased stocks by foreign investors gained 14 percent in the third quarter.

Market watchers advised building a defensive portfolio in anticipation of a potential economic slowdown.

Kim Kyung-hoon, an analyst at Daol Investment & Securities, warned that the economic contraction that began in August has continued to worsen, with "stronger risk-averse signals" emerging since October.

"This contraction trend is likely to persist at least until the end of the first half of next year, potentially limiting the upside for the domestic stock market," he noted.

Similarly, Kim Dae-jun, an analyst at Korea Investment & Securities, emphasized the need for caution in investment, calling for awareness of the weakened economic momentum despite the big rate cut by the US Federal Reserve in September aimed at achieving a soft landing.