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Kospi records first monthly fall after March

Despite lingering uncertainty over virus resurgence and US election, retail investors still betting on market recovery

An electric board at the Korea Exchange shows the closing of the Kospi and Kosdaq on Friday. (Korea Exchange)
An electric board at the Korea Exchange shows the closing of the Kospi and Kosdaq on Friday. (Korea Exchange)
South Korea’s main bourse Kospi saw a monthly dip in October, discontinuing its winning streak following March, when the market hit its rock bottom over market fears on the coronavirus and started a seven-month rebound. Despite the index heading south, retail investors have flocked to high-risk leveraged exchange-traded funds, betting on the local stocks’ recovery, data showed Sunday.

According to the nation’s sole securities exchange operator Korea Exchange, Kospi closed at 2,267.15 on Friday, down 2.6 percent from the end of September. The tech-heavy Kosdaq’s volatility also increased as it fell by 6.5 percent to 792.65 in the cited period.

Retail investors net purchased nearly 1.27 trillion won ($1.11 billion) in the Kospi market, but as foreign and institutional investors offloaded 408.2 billion won and 715.5 billion won, respectively, the main bourse ended up recording a negative figure.

The benchmark index recorded a steady monthly rise from April as the virus shock hammered market started recovering. The bourse rebounded 10.9 percent in April, then gained 4.2 percent in May and 3.8 percent in June.

The upward trend continued in July and August, advancing 6.6 percent and 3.4 percent, respectively. Then the index only slightly rose by 0.07 percent in September before it started to move downward last month.

Market watchers attributed the recent fall to the rising global uncertainties driven by resurgence of the COVID-19 around the world and the upcoming US presidential election. However, it is less likely to be a sign of another market slump, they added.

Amid lingering uncertainties, local leveraged ETFs have been popular investment options for retail investors as they seek profit doubles when the Kospi 200 or Kosdaq 150 -- baskets of the top 200 blue-chip stocks of Kospi, or the top 150 large-cap stocks of Kosdaq -- rise again. They bet 263.8 billion won in the high-risk funds last month, the KRX data showed.

Due to the possibility of even more increasing market volatility, analysts warned that investors need to be aware that they may face unexpected results in doubling losses if the leveraged ETFs end up falling.

“Major events such as the US elections and the US Federal Open Market Committee are underway. While they may greatly influence the local stock market, it will pay keen attention to especially the presidential election and the speed of the virus spread (in the US and Europe),” said Noh Dong-kil, an analyst at NH Investment & Securities.

“Amid raising concerns over a delay in the US economic recovery with the COVID-19 situation, the stock market’s uncertainty may continue even after the US presidential election,” said Ahn So-eun, an analyst at IBK Securities.

By Jie Ye-eun (
Korea Herald daum