On Wednesday, Seoul's stock market failed to shake off its recent slump, with the Korea Composite Stock Price Index (KOSPI) closing down 0.48% at 6,838.04 points, marking a third consecutive trading day of declines.

With today's session officially over, Korean equities have also closed the books on an extremely brutal third quarter — the KOSPI plunged 19.3% over the past three months, the worst quarterly decline since the first quarter of 2020, when the COVID-19 pandemic first broke out.

A sustained exodus of foreign capital, surging U.S. Treasury yields and a阶段性 pullback in the global AI trade combined to form a triple storm that battered the Korean stock market.

Looking back at the full trading day, the KOSPI was initially lifted by an overnight stabilization on Wall Street, briefly staging a rebound after opening higher. However, with overall market buying support proving feeble, bulls suffered a ruthless reversal. In the afternoon, foreign investors stepped up selling, and the benchmark quickly turned lower and drifted down, ultimately failing once again to close in positive territory — an intraday pattern of opening high and closing low that laid bare the fragility of current market confidence.

The core factors behind today's weakness and the KOSPI's bottom-tier performance among major global markets in the third quarter are mainly concentrated in the following three areas:

First, persistently rising U.S. Treasury yields and pressure on the Korean won triggered capital outflows. U.S. Treasury yields have climbed again recently, and expectations that the Federal Reserve will keep rates high for an extended period have once again subjected global risk assets to repricing pressure. As overseas capital continued to flow back into dollar-denominated assets, the Korean won remained under pressure against the greenback, forcing foreign investors to indiscriminately cut Korean equity positions both today and throughout the third quarter — the direct trigger that crushed the benchmark.

Second, the fading of the artificial intelligence (AI) trade directly sparked a "valuation storm" for Korea's memory chip giants. As a global bellwether for the technology industry, the Korean stock market is heavily dependent on its semiconductor sector. However, in the third quarter, global markets began to reassess the return on investment in AI infrastructure, causing a frantic rush for the exits by earlier profit-takers. As heavyweight constituents, Samsung Electronics and SK Hynix suffered intense selling by overseas institutions between July and September. Although the fundamentals and forward price-to-earnings ratios of both giants had fallen to historic lows of 4-5 times, the stampede triggered by frozen sentiment still directly dragged down the overall performance of the KOSPI.

Finally, the high leverage of local retail investors backfired and intensified the market's technical decline. South Korean regulators had repeatedly warned about the rampant growth of high-leverage single-stock ETFs and margin financing tools. As the market turned downward in the third quarter, a large number of active Korean retail investors — known as "ants" — faced enormous margin call pressure. Forced liquidations and margin blow-ups that appeared frequently in the afternoon and near the close amplified the index's intraday losses and volatility on a technical level.

From a longer time horizon, however, Korean equities currently present an extreme "fire and ice" picture. Despite the heavy damage in the third quarter, the KOSPI's year-to-date gain still stands at a lofty roughly 60% thanks to an overly rapid rally in the first six months of the year, placing it alongside Taiwan's stock market among the world's top performers — suggesting that the current sell-off is to a large extent a violent correction of the极度 overbought conditions in the first half.

Looking ahead, most overseas institutions believe pessimism toward Korean equities has now reached extreme levels and that valuation appeal is beginning to emerge. In the near term, however, the rate-hike outlook for the Bank of Korea and macroeconomic headwinds remain, and the road to a fourth-quarter rebound is likely to be bumpy. The market is eagerly awaiting U.S. core PCE inflation data due later this week for the latest stabilizing signals on a Fed policy pivot and a peak in U.S. Treasury yields.