KOSPI's biggest October rout problem: No one left to buy the dip

Korean stocks are bracing for a more severe sell-off than the one witnessed in July, with a dwindling number of buyers struggling to offset foreign selling pressure, analysts have warned. The KOSPI index plummeted for seven consecutive days, culminating on Thursday with a 20.7 percent decline, bringing the benchmark down to 5,554.22.

Though the index recovered by 2.05 percent on Friday, the Korean market faced a particularly tough time amidst Asia's broader equity sell-off. This downturn is occurring less than three months after the KOSPI plummeted from 9,385.59 on June 19 to a 52-week low of 5,262.77 on July 29, only to rebound above 7,000. Despite optimistic earnings forecasts, the present market conditions starkly contrast with those of July, when a bullish rally pushed the KOSPI above the 9,000 mark.

In contrast, the latest sell-off has plagued a market that is already grappling to regain its footing. David Chung, the founder and CEO of Redpoint Partners, highlighted that the KOSPI has rallied approximately 60 percent so far this year, even as foreign investors sold a net 200 trillion won ($149.4 billion) worth of Korean equities.

While foreign selling has been a persistent feature of the Korean stock market this year, the critical factor has been the dwindling pool of buyers willing and able to step in and absorb the excess.