Korea Stock Risk? Goldman: Retail Investors Gone, Buyback Ammo Spent by October, Only Foreigners Left

Data shows Korean retail investors' net buying in August plunged 90% from June, with the market propped up only by buybacks from Samsung and SK Hynix. But Goldman Sachs believes this last backstop will be exhausted by mid-October! Once support disappears, the market will face a severe shock, and its fate will depend entirely on foreign investors. Prepare for a potential liquidity shock in October.

The Korean stock market is at a critical juncture where multiple support forces are collapsing simultaneously. Retail investors are exiting en masse, institutions continue to sell, and the only remaining backstop—corporate buybacks by Samsung Electronics and SK Hynix—is expected to run out of ammunition by mid-October. At that point, the direction of the KOSPI will hinge almost entirely on foreign flows and the won's exchange rate.

Goldman Sachs analyst Chris Cha noted in a September 3 report that retail net buying in August shrank 90% from June, plunging from 54.5 trillion won to 5.4 trillion won. The retail momentum that drove KOSPI's strong rebound in the first half has essentially been exhausted. Meanwhile, foreign investors and local institutions also recorded net selling in August, leaving the market barely stable thanks only to corporate buybacks.

Goldman warns that at the current pace of buyback execution, Samsung and SK Hynix will exhaust their buyback quotas between late September and mid-October, well ahead of their official November deadlines. Once this artificial support disappears, market support will revert to regular institutional flows, which are conspicuously absent at current price levels. Goldman accordingly advises investors to position early for a potential liquidity shock in October.

Retail Investors Retreat En Masse, Buying Momentum Nearly Zero

Korean retail investors, once the most important driver of KOSPI's first-half performance, are undergoing a fundamental shift in behavior.

Goldman's report shows retail net buying shrank sharply in August, falling from a June peak of 54.5 trillion won to just 5.4 trillion won, a month-over-month decline of 90%. Goldman attributes this shift to three factors:

Behavioral: Retail investors have switched from aggressive dip-buying to a conservative strategy of loss avoidance and selling into rebounds.

Trading range: Goldman observes systematic retail buying concentrated below the 6,500 level on the KOSPI. Once the index attempts to break above 7,000, retail investors quickly unwind and exit, creating a clear range-capping effect.

Liquidity: Brokerage account investor margin has been below 100 trillion won for a full week, indicating retail investors' deployable funds are drying up.

At the same time, time deposit balances at Korea's top five commercial banks surpassed 1,000 trillion won for the first time, with a combined inflow of 55.83 trillion won in July and August, as funds clearly shift toward safe-haven assets.

Moreover, the leveraged ETF boom that previously attracted massive retail participation has come to an end. Regulatory requirements mandating a five-hour online course for leveraged trading eligibility have shut out a large number of momentum chasers, bursting the leveraged ETF bubble.

Corporate Buybacks: The Only Backstop, But the Window Is Closing

With retail investors, foreign investors, and local institutions all recording net selling in August, the only net buyer came from the "other corporates" category—namely corporate buybacks led by Samsung Electronics and SK Hynix.

Goldman data shows that on a recent trading day, buybacks by these two companies contributed approximately $1.2 billion in net buying, accounting for over 98% of that day's inflows in the "other corporates" category, and they have maintained net buying for 12 consecutive trading days. It is this sustained buyback support that has prevented a sharper decline in the KOSPI amid broad selling pressure.

However, this support has a clear time limit. Samsung Electronics and SK Hynix's buyback execution windows expire on November 21 and November 19, respectively. But by tracking execution speed, Goldman found that because both companies are front-loading their buybacks, at the current rate of quota consumption, buyback funds are expected to be exhausted between late September and mid-October—about a month ahead of the official deadlines.

Goldman warns that when that happens, secondary market support will revert to regular institutional flows, which are clearly unwilling to participate at current price levels, exposing the KOSPI to significant liquidity vacuum risk.

Foreign Flows and the Won: Key Variables for the Second Half

Goldman believes that with retail buying exhausted and the corporate buyback window closing, foreign net inflows have become the most critical structural variable for KOSPI's second-half trajectory.

Recent trends show foreign net selling pressure has eased somewhat. In May and June, foreign investors net sold 44.7 billion won and 48.6 billion won, respectively; by July and August, net selling had narrowed to about 9.9 billion won and 10 billion won, indicating selling momentum has clearly weakened.

The exchange rate environment is also turning more favorable. The won has appreciated 12.9% from its mid-year low, with USD/KRW falling from 1,561.50 to 1,359.15. Although the correlation between USD/KRW and the KOSPI has recently shown some divergence, Goldman believes a stronger won overall provides more favorable currency conditions for global asset reallocation into Korean equities.

Goldman has accordingly formulated three execution strategies: trim positions near the 7,000 level on the KOSPI, where retail investors' breakeven selling pressure is expected to form significant resistance; position early for rising volatility after buybacks end in October; and closely track foreign investors' rotation into semiconductor leaders to capture structural opportunities from won appreciation and stabilizing foreign net selling trends.