As Kospi looks down barrel of September blues, U.S. midterms loom over seasonal rebound hopes
The convergence of several annual factors is likely to drag the bourse down, and developments in the United States may dampen the typical end-of-year upswing.
A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 7,051.64 points on Sept. 9, up 97.12 points, or 1.4 percent, from the previous trading session.NEWS1
September has historically been the weakest month for the Kospi, but analysts see any potential correction amid heightened volatility as a buying opportunity ahead of a possible rebound later this year. Some, however, warn that uncertainty surrounding the U.S. midterm elections could bring even greater volatility in the fourth quarter.
The Kospi closed Wednesday at 7,051.64, up 97.12 points, or 1.4 percent, from the previous session, settling precariously above the 7,000 level.
The close marked a rebound from the day before, when it dropped to 6,954.52, foreshadowing the market's September blues. Though the index climbed above 7,100 at one point during intraday trading, which fueled hopes for further gains, it failed to break through a wall of sell orders from retail investors around the 7,000 level.
On Wednesday, foreign and institutional investors bought a net 435 billion won ($325.8 million) and 941.9 billion won, respectively, in shares on Wednesday. The secondary Kosdaq also closed 2.28 percent higher at 830.37.
The fluctuation comes as the bourse braces for a tendency for downward factors to converge in September, including portfolio adjustments by institutional investors returning from summer vacations, end-of-quarter rebalancing, the issuance of U.S. Treasurys ahead of the federal government's fiscal year-end and monetary policy meetings in major economies. In Korea, demand for cash also tends to rise ahead of the Chuseok harvest festival holiday.
From 2000 through last year, the Kospi posted an average September return of minus 0.68 percent, the lowest of any month of the year.
A trader works at Hana Bank's dealing room in central Seoul on Sept. 8, as the Kospi closed at 6,954.52, down 40.87 points, or 0.58 percent, from the previous session.YONHAP
This year, the seasonal weakness could be even more pronounced with the U.S. midterm elections scheduled for early November.
“That is because uncertainty increases over the election outcome and potential policy changes afterward," Kim Jae-seung, a researcher at Hyundai Motor Securities, said.
Analysts point to October and November as a potential period for a market rebound.
“Seasonal weakness in September, conversely, tends to be followed by seasonal strength from October onward,” Kim said. “Investor sentiment in both Korean and overseas stock markets could recover rapidly after November, once the two major events — Anthropic's listing and the U.S. midterm elections — are over.”
The U.S. AI company is expected to hold an initial public offering in October. A successful market debut could revive investor appetite across the AI industry, potentially benefiting Korea's stock market given its heavy weighting toward semiconductor companies.
One strategy being discussed is to buy stocks during a correction in September and October, then wait for a rebound from November onward.
The outcome of the U.S. midterms, however, could complicate investment decisions regarding Korean equities.
“If the Democrats take control of the U.S. Congress, AI infrastructure construction and capital investment could face setbacks,” said Kim Jun-young, a researcher at iM Securities. “One example is Democratic New York Gov. Kathy Hochul's executive order in July imposing the first one-year data center moratorium in the United States in New York state.”
“The fourth quarter could be more challenging overall than the third quarter for Korea's stock market, given its heavy weighting toward semiconductor stocks."
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
