Once frantically buying the dips, now their "ammunition depot" has shrunk by 51 trillion Korean won! South Korean retail investors can no longer afford to buy.

Title context: Once frantically buying the dips, now their "ammunition depot" has shrunk by 51 trillion Korean won! South Korean retail investors can no longer afford to buy. The retail investor capital pool in the South Korean stock market is shrinking at an alarming pace, and market liquidity is facing a severe test. According to data from the Korea Financial Investment Association, as of October 22, the balance of investor deposits at South Korean securities firms had fallen to 88.68 trillion Korean won (about $35.5 billion), plunging by about 51 trillion Korean won, or 36.5%, from the historical peak of 139.69 trillion Korean won set on June 4, returning to the level seen at the start of the year. The figure fell below the 90 trillion Korean won mark on October 21, the first time in nearly nine months, and hit its lowest level since January 13. Meanwhile, the KOSPI suffered seven consecutive declines this month and plunged 7.57% in a single day on October 15, while pressure from sustained net selling by foreign investors has not yet faded. The rapid withdrawal of retail funds is shaking the core force that had previously supported the South Korean stock market. In the first half of the year, it was retail investors who entered the market on a large scale and offset foreign selling pressure with massive net purchases; now, as the "ammunition depot" runs low, the market's buying support has clearly weakened, and the KOSPI faces downward pressure in its subsequent trend. Industry insiders hold differing views on whether the market can achieve a sustained rebound, with the focus of disagreement centering on the tug-of-war between credit risks in the artificial intelligence industry and the fundamentals of chip stocks. Deposits plunge: 51 trillion Korean won evaporates in four months Investor deposits refer to funds deposited by investors into securities firm accounts that have not yet been used to buy stocks or other assets, and are usually regarded as the "ammunition reserve" for potential stock market buying. A decline in this indicator may stem from investors actively buying stocks or from funds directly leaving accounts, so the entire decline cannot simply be equated with capital flight. However, given the market backdrop, the signal value of this round of deposit decline cannot be ignored. In the first half of the year, as the KOSPI continued to rise, investor deposits climbed steadily, with new inflows clearly exceeding actual stock purchase spending, forming a clear trend of capital accumulation. But after hitting a historical high on June 4, deposits began to decline continuously, indicating that new retail funds flowing into the stock market had fallen sharply and could no longer keep pace with the scale of buying. The pace of decline accelerated markedly in October. The deposit balance shrank from 100.44 trillion Korean won on October 12 to 96.91 trillion Korean won on October 15 in just three days, and then fell further into the 88 trillion Korean won range the following week. At the same time, the margin balance, which measures the scale of leveraged investment, also fell to about 32 trillion Korean won in mid-this month. With both cash reserves and leveraged funds contracting, this reflects an across-the-board cooling of investor sentiment amid sharp market volatility. Retail investors are still buying, but "new money" has stopped flowing in It is worth noting that the decline in deposits does not mean retail investors have fully retreated. Data show that from June 4 to October 23, individual investors net bought 44.17 trillion Korean won of stocks in the KOSPI market and 3.15 trillion Korean won in KOSDAQ, while net purchases of ETFs during the same period reached 28.25 trillion Korean won. Technically speaking, retail investors remain net buyers in the market. The crux of the problem is that continued buying has consumed existing funds, while the pace of new capital inflows is far from keeping up with the pace of consumption. In the first half of the year, new inflows exceeded stock purchase spending, so the deposit balance continued to accumulate; after entering the second half, this positive cycle has reversedretail investors are still taking over shares, but the pace of replenishing "ammunition" has slowed sharply, and the deposit balance has continued to decline accordingly. This structural change means that even if retail investors maintain a net buying posture in the short term, their actual capacity to absorb foreign selling has been greatly reduced. The role of retail investors as "bag holders" in the first half of the year is difficult to sustain against the backdrop of a continuously shrinking capital pool. The recent trend of the KOSPI has further amplified the risk of liquidity contraction. The index fell for seven consecutive trading days starting October 6 and plunged 7.57% in a single day on October 15. It closed at 5,550.30 points on October 23, with a cumulative decline of nearly 20% over the past month. During this period, foreign investors continued to sell net, and the market's supply-demand structure deteriorated markedly. The shrinking retail capital pool, combined with foreign selling, has created a double suppression for the KOSPI. In the first half of the year, retail investors relied on ample deposit balances to absorb large-scale foreign sell orders, stabilizing the market to a certain extent; now the deposit balance has fallen back to a low level at the start of the year, and retail investors' buffering capacity has declined significantly. If foreign selling pressure persists, the market lacks sufficient buying to offset it, and downward risk will further accumulate. The simultaneous decline in margin balances also deserves attention. Contraction of leveraged funds is usually accompanied by intensified market volatility. Once forced liquidation is triggered, it may create a negative spiral and further depress the index. Rebound outlook: a tug-of-war between fundamentals and risk sentiment There are clear divisions within the market regarding the KOSPI's subsequent trend. Optimists believe that the profitability of core companies, represented by chipmakers, remains solid, and the current index is clearly undervalued relative to fundamentals, leaving room for recovery. However, the cautious camp is equally vocal. An official at a securities firm said: "The KOSPI's recent decline is indeed excessive relative to earnings fundamentals, but the catalyst that previously drove the market higherthe artificial intelligence industryis currently facing considerable credit risk concerns, so it is still too early to expect a sustained rebound now." The emergence of credit risks in the AI industry has shaken the core logic that previously supported the market's valuation expansion. Before this uncertainty dissipates, a large-scale return of retail funds will be difficult to achieve, and the continued shrinking of the "ammunition depot" will also leave the KOSPI without sufficient private capital support when under pressure. This article is reposted from "Wallstreetcn," author: Dong Jing, GMTEight editor: Wang Qiujia.