[Edaily Reporter KIM YOON-JEONG ] Last month, the KOSPI fell by more than 16%, marking the seventh-largest monthly decline in history. This is the third record-breaking decline this year alone, following those in March and July. Notably, while the daily price swings in October were smaller than during the previous two sharp sell-offs, the downtrend persisted for an extended period. As the net buying volume by retail investors—who had been buying stocks during the market slump—continues to decline, the securities industry believes that concerns over the profitability of artificial intelligence (AI) investments, along with the burdens of high oil prices and high interest rates, will determine the future direction of the stock market.

◇March and July Saw Repeated Sharp Swings… October Marks a “Prolonged Downtrend”
According to the Korea Exchange on the 2nd, the KOSPI closed at 5,730.74 on the 30th of last month, marking a 16.19% decline from the end of September (6,838.04). This is the seventh-largest monthly drop on record.
This marks the third time this year that the KOSPI’s monthly decline has ranked among the top seven largest on record. In March, it fell 19.08%, ranking fifth all-time, and in July, it dropped 22.19%, marking the third-largest monthly decline on record. This means that three of the top seven largest monthly declines in history have occurred this year.
Among these three sharp market declines, October stood out in that the downtrend persisted for an extended period despite relatively small daily fluctuations. In March, out of 21 trading days, the market rose on 10 days and fell on 11; in July, out of 22 trading days, there were 10 up days and 12 down days. In contrast, in October, out of 20 trading days, there were only 8 days of gains and 12 days of losses, meaning the proportion of losing days was higher.
In particular, from October 6 to 15, the KOSPI fell for seven consecutive trading days. The index, which stood at 7,003.74 on the previous trading day (October 2), dropped to the 5,554 level by October 15. Considering that the longest consecutive losing streaks in March and July were four and three trading days, respectively, the downtrend in October lasted relatively longer.
On the other hand, daily volatility was greater in March and July. The average daily absolute percentage change—calculated as the average of the absolute values of the daily percentage changes—was highest in July at 4.89%, followed by March at 3.64% and October at 2.78%. The number of days on which the index rose or fell by more than 5% was 10 in July and 7 in March, but only 3 in October.
In fact, on March 4, the KOSPI plummeted 12.06% in a single day before surging 9.63% the following day. In July as well, the index plummeted 10.84% on the 28th but then surged 17.91% on the 31st, demonstrating a sharp rebound. In contrast, in October, the largest single-day drop was a 7.57% decline on the 15th; even after surging 6.63% on the 28th to recover the 6,000-point level, the index fell for two consecutive days, slipping back to the 5,700-point level. Although the monthly decline itself was smaller than in March and July, the October market was characterized by a prolonged downward trend and a failure to sustain a rebound.
◇Foreign Investors Continue Net Selling…Retail Investors’ Net Buying Declines
Differences were also evident in supply and demand by investor type. According to the Korea Exchange, foreign investors were net sellers during all three sharp market declines this year. They recorded net sales of 35.8806 trillion won in March, 9.8936 trillion won in July, and 18.6757 trillion won in October, respectively.
While foreign investors were net sellers, retail investors continued to be net buyers, though the scale of their purchases gradually decreased. Retail net buying, which reached 33.5690 trillion won in March, shrank to 5.3715 trillion won in July and 3.3486 trillion won in October. The volume of net buying in October fell by approximately 90.0% compared to March and by approximately 37.7% compared to July. Although retail investors maintained a net buying trend amid the sharp market decline, the scale of their purchaseswas significantly smaller than before.
Investor deposits also declined. According to the Korea Financial Investment Association, as of the 30th of last month, investor deposits stood at 90.2351 trillion won, down 14.4293 trillion won (13.8%) from the end of September (104.6644 trillion won). Compared to the year’s end-of-month high recorded at the end of May (131.5856 trillion won), the figure has fallen by 41.3505 trillion won (31.4%). With idle funds in the stock market also down by more than 30% from their May peak, market liquidity conditionsappear to have tightened compared to earlier periods.
◇Risks of Further Correction and Hopes for a Rebound Coexist… Attention Focused on Whether This Month Will “Shake Off Uncertainty”
The securities industry points to high oil prices and inflationary pressures stemming from the prolonged Middle East crisis, as well as rising financing costs for AI companies due to high interest rates, as the main causes of the recent stock market correction. While expectations for expanded AI investment remain, analysts note that growing doubts about whether massive investment costs can be translated into actual profits are weighing on investor sentiment.
Shin Seung-jin, Team Leader at the Samsung Securities Research Center, assessed, “The sentiment of retail investors—who had driven the KOSPI’s rise by absorbing foreign selling in the first half of the year—has significantly weakened amid the recent increase in market volatility.” He explained that high interest rates have made bonds a relatively attractive investment, while the current environment makes it difficult for foreign capital to flow in immediately.
If external headwinds persist, the possibility of further declines in the index cannot be ruled out. Shin stated, “If high oil prices and high interest rates continue due to geopolitical conflicts and macroeconomic uncertainty, the KOSPI could fall below the 5,150 level (based on a 12-month forward price-to-book ratio of 1).” While he mentioned the possibility of the index temporarily dipping below the 5,000 level depending on market conditions, he assessed that this is unlikely to materialize, given that the domestic stock market’s projected return on equity (ROE) for 2026–2027 is expected to exceed 20%.
The key factors for a market recovery are identified as the easing of geopolitical uncertainty and the stabilization of funding conditions for AI companies. Team Leader Shin explained, “The most important catalyst for a rebound would be a simultaneous decline in oil prices and interest rates as the situation in the Middle East stabilizes.” He also pointed out that the stabilization of credit default swap (CDS) premiums—which indicate the credit risk of AI companies—and U.S. high-yield bond spreads are indicators to watch.
Jeong Da-un, an analyst at LS Securities, left open the possibility of a retest of the short-term low due to reduced share buybacks by U.S. Big Tech companies and uncertainty surrounding the AI industry’s monetization. However, the analysis suggests that additional shocks do not necessarily lead to a long-term decline, as there is a possibility that the U.S. Federal Reserve (Fed) will ease its tightening stance if credit risks escalate. Analyst Jeong predicted, “Given last Friday’s decline in the U.S. stock market and the ongoing fundamental issues, we must remain open to the possibility of a temporary retest of the lows.”
There are also assessments that the underlying fundamentals of AI investment remain solid. Park Sang-hyun, an analyst at iM Securities, analyzed that the AI investment cycle is being sustained, citing the growth in capital investment in both the U.S. and South Korea, as well as strong domestic semiconductor exports. While CDS premiums for major AI companies have risen, it is still too early to conclude that this has escalated into a full-blown credit crisis.
Whether external uncertainties—such as the U.S. midterm elections in November, the situation in the Middle East, and France’s fiscal risks—are resolved will also be a key factor determining the direction of the stock market. Analyst Park cited historical data showing that in all 21 U.S. midterm elections since 1942, the S&P 500 index rose from late October—just before the election—through late June of the following year, with an average gain of approximately 16.6%. The analysis suggests that if political uncertainty eases after the midterm elections, it could serve as a catalyst for a recovery in investor sentiment. Analyst Park predicted, “Whether various uncertainties are resolved in November will have a direct and indirect impact on the debate over the profitability of AI investments, while also significantly influencing the stock price trends of hyperscalers.”