South Korea equity market adjustments

In late June, South Korea’s National Pension Service announced it would resume its domestic‑stock rebalancing in July after a pause that had helped lift the KOSPI and the won. Analysts expected the fund to trim its overweight domestic position gradually, with potential sell volumes measured in tens of trillions of won, but warned that the execution would be discreet to avoid a market shock.

By the end of July, domestic investors showed a sharp shift toward private‑market‑return (RIA) accounts, expanding the number of accounts more than six‑fold since March and boosting balances to over 2.6 trillion won. The surge was driven by tax incentives for reinvesting proceeds from foreign‑listed stock sales into Korean equities. At the same time, the KOSDAQ slipped to a one‑year low, with trading volume falling dramatically, while the main KOSPI market recorded substantial net buying. Authorities were considering a second‑phase national growth fund and reforms to the market’s listing system.

On 27 July, the KOSPI opened above 6,700, rising about 0.5 % to 6,728 on optimism around Naver’s global AI investments. Individual investors bought roughly 75 trillion won of shares, whereas foreign investors and institutional funds were net sellers of 6.5 trillion won and 1.1 trillion won respectively. The pattern contrasted with earlier days, as locals tended to sell when the index rose and buy on declines, while foreigners shifted to net selling after the KOSPI passed the 7,000 level. The KOSDAQ recovered to around 760 points on net buying by locals and institutions, even as foreign investors remained sellers. Market participants awaited earnings from Samsung, SK Hynix and U.S. tech firms, alongside possible rate hikes by the Bank of Korea in response to inflation pressures.