The South Korean stock market is approaching a critical juncture where multiple sources of support are simultaneously starting to fade. Retail investors have significantly retreated, and institutional players remain persistent net sellers. The only pillar currently holding the market up—share buybacks from Samsung Electronics and SK Hynix—is expected to run out of fuel by mid-October. Once that happens, the trajectory of the Korea Composite Stock Price Index (KOSPI) will hinge almost exclusively on foreign capital flows and the direction of the Korean won.

According to a September 3 report by Goldman Sachs analyst Chris Cha, retail net buying activity in August plummeted by 90% compared to June, dropping from 54.5 trillion Korean won to just 5.4 trillion Korean won. This signals that the retail momentum that drove the KOSPI's strong first-half rally has largely dissipated. At the same time, both foreign investors and domestic institutions recorded net selling in August, meaning the market has been kept stable only by corporate buyback programs.

Goldman Sachs warned that based on current execution speeds, the buyback quotas for Samsung Electronics and SK Hynix will be exhausted between late September and mid-October—about a month earlier than the official November deadlines. Once this artificial support disappears, the market will have to rely on regular institutional flows, which are noticeably absent at current price levels. The investment bank advised clients to position themselves ahead of this shift to prepare for a potential liquidity shock in October.

Retail exodus leaves buying power nearly depleted

The individual investors who were once the most important driving force behind the KOSPI's first-half gains are undergoing a fundamental change in behavior. Goldman Sachs data shows retail net purchases shrank dramatically 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%.

The report attributes this transformation to three key factors. On a behavioral level, retail investors have shifted from aggressive dip-buying to a more conservative approach centered on loss avoidance and selling into rebounds. On the trading front, Goldman Sachs observed that systematic retail buying activity is concentrated below the 6,500-point level of the KOSPI. Once the index attempts to break through 7,000 points, retail participants quickly close positions, creating a distinct ceiling effect. Additionally, on the liquidity side, margin balances in brokerage accounts have stayed below 100 trillion won for over a week, indicating that retail investors have largely run out of available funds.

In parallel, time deposits at South Korea's top five commercial banks have surpassed 1,000 trillion won for the first time ever, with 55.83 trillion won flowing in during July and August combined. This clearly shows money rotating toward safer assets. The leveraged ETF craze that previously attracted many retail participants has also come to an end. Regulatory requirements mandating a five-hour online course before qualifying for leveraged trading have kept many momentum chasers out, and the leveraged ETF bubble has subsequently burst.

Corporate buybacks: the last line of defense with an expiration date

Against the backdrop of net selling from retail investors, foreign investors, and local institutions in August, the only net buying force has come from the "other corporations" category—essentially the share repurchase programs of Samsung Electronics and SK Hynix.

Goldman Sachs data reveals that on a recent trading day, buybacks from these two companies combined to contribute approximately $1.2 billion in net buying, accounting for over 98% of the day's inflow in the "other corporations" category. This has maintained a net buying streak for 12 consecutive trading days. It is this persistent buyback support that has prevented the KOSPI from falling more sharply under the weight of selling pressure from multiple fronts.

However, this support mechanism has a clear time limit. The official buyback execution windows for Samsung Electronics and SK Hynix expire on November 21 and November 19 respectively. But Goldman Sachs, by tracking the pace of execution, has found that both companies are front-loading their purchases. Based on the current rate of quota consumption, the buyback funds are expected to be depleted between late September and mid-October—roughly a month ahead of schedule.

Goldman Sachs cautioned that once this support disappears, the market's secondary layer of support will shift back to regular institutional capital flows. Given that institutions are clearly reluctant to participate at current valuation levels, the KOSPI could face a significant liquidity vacuum.

Foreign flows and the won: the twin drivers for the second half

Goldman Sachs believes that with retail buying drying up and the corporate buyback window closing, net foreign capital inflows have become the most critical structural variable for the KOSPI's second-half performance. Recent trends indicate that foreign selling pressure is moderating. In May and June, foreign investors recorded net selling of 44.7 billion won and 48.6 billion won respectively. By July and August, that net selling narrowed to approximately 9.9 billion won and 10 billion won, showing a clear easing of sell-off momentum.

The currency environment is also turning more favorable. The Korean won has appreciated 12.9% from its mid-year low, with the USD/KRW pair falling from 1,561.50 to 1,359.15. Although the recent correlation between USD/KRW and the KOSPI has shown some divergence, Goldman Sachs argues that a stronger won overall provides more favorable currency conditions for global assets to be reallocated into South Korean equities.

Based on this analysis, Goldman Sachs outlined three execution strategies: trimming positions near the 7,000-point level of the KOSPI, where retail break-even selling pressure is expected to form a notable resistance; positioning ahead of the expected volatility increase following the end of buybacks in October; and closely monitoring foreign capital rotation into semiconductor leader stocks to capitalize on the structural opportunities presented by won appreciation and the stabilization of foreign net selling trends.