Goldman Sachs Says Kospi Selloff Is Far Worse Than a Typical Correction

Comparable to the Covid outbreak and the US credit downgrade

Korea's fear gauge jumps 23% in a day

Goldman Sachs said the sharp slide in South Korea's Kospi index amounts to a far more severe wave of selling than a typical short-term correction. The bank said the speed and scale of the decline, with no rebound even for a single day, were comparable to the early stages of the Covid-19 pandemic and the US credit-rating downgrade.

According to the financial investment industry on Oct. 15, Goldman Sachs wrote in an investor note before the market opened that the Kospi could post a seventh straight day of losses. More than the length of the decline, the bank focused on the size of the drop compressed into that stretch. Even before accounting for the plunge on Oct. 15, the fall from the peak to the trough in the current selloff had exceeded 14%. Goldman Sachs described that as far more severe than a typical seven-session correction.

Over the past 20 years, only two selloffs of that magnitude have unfolded without a single one-day rebound: the onset of the Covid-19 pandemic in March 2020, when the market fell 20.5%, and the US credit-rating downgrade in August 2011, when it dropped 15.1%, Goldman Sachs said. The Kospi closed down 454.59 points, or 7.57%, at 5,554.22 on Oct. 15. It was the index's seventh straight losing session, the longest such streak since September 2024.

Technical indicators are also adding to market anxiety. The Kospi is trading well below its 200-day moving average, a gauge of the long-term trend. The 200-day average stood at 6,402.8 on Oct. 15, leaving a gap of more than 840 points from the close. A prolonged break below a long-term moving average can trigger outflows from trend-following funds and intensify investor selling.

The VKOSPI, the Kospi 200 volatility index often referred to as Korea's fear gauge, jumped to the 55 level on Oct. 15 from 44.91 a day earlier. That marked a one-day gain of about 23%. Compared with 36.81 on Oct. 8, it has risen more than 50% in four trading sessions. The index annualizes expected volatility over the next 30 days implied by options prices, signaling rising caution over further sharp market swings. The Fear & Greed Index compiled by AI-based investment information platform EpicAI also showed the market in a state of "extreme fear" at minus 3.47.

Han Ji-young, an analyst at Kiwoom Securities, said bargain hunting driven only by perceptions that the selloff has gone too far or by attractive valuations would be limited in its ability to quickly reverse the index's downtrend. Uncertainty surrounding the AI industry, including in South Korea and the US Nasdaq market, is increasing over time, she added.

Jeon Beom-jin, Hankyung.com reporter, forward@hankyung.com