With the KOSPI hovering around the 7,000 level ahead of the Chuseok holiday, historical data show a clear pattern of weakness before the break and strength immediately after. This year, however, U.S. inflation data and a summit between Washington and Beijing are clustered around the holiday, leaving open the question of whether the seasonal pattern will repeat.
Of the 26 Chuseok holidays from 2000 through last year, the KOSPI advanced over the five trading days immediately following the break on 19 occasions, or 73.1%, according to the Korea Exchange on the 21st. The largest gain came in 2004, when the index rose 6.27% over those five sessions.
The pattern has held recently as well. The KOSPI gained 3.82% in the five trading days after last year's holiday, following increases of 0.60% in 2024 and 1.85% in 2023. In the five sessions before the holiday, by contrast, the index rose in 13 of the 26 years and fell in the other 13 — an even split.
Analysts attribute the pattern to investors trimming equity exposure or taking profits before an extended market closure to avoid uncertainty, with funds flowing back once trading resumes. Daishin Securities said the historical data suggest a repeat of cautious positioning before the holiday followed by a rebound afterward. The brokerage added that the so-called Chuseok effect stems from short-term supply and demand and does not determine the market's medium- to long-term direction.
Major overseas events are concentrated around this year's holiday. The August personal consumption expenditures price index, the gauge the U.S. Federal Reserve watches most closely for inflation, is due late this month, and U.S. memory chipmaker Micron is set to report earnings. A U.S.-China summit is scheduled for the 24th, the first day of the Chuseok break, and the outcome of talks on trade and tariffs, critical minerals such as rare earths, and technology restrictions could feed into Korean stocks after the holiday.
Some analysts say macro variables such as oil prices and interest rates could weigh on sentiment, while risks specific to the domestic market are relatively contained. They point to the possibility of a continued divergence led by sectors backed by earnings and improving business conditions, including semiconductors, defense and cosmetics, which have driven the market recently.
For the KOSDAQ, third-quarter earnings are seen as the key variable after the holiday. Since 2005, the KOSDAQ has outperformed the KOSPI between Chuseok and year-end on only five occasions, according to SK Securities. Year-end selling by major shareholders seeking to avoid capital gains taxes and a preference for high-dividend large caps have worked against the junior market.
That could change if momentum in large caps fades and clear themes form around the KOSDAQ's biggest names, drawing in foreign and institutional money. "The government's policy push to invigorate the KOSDAQ could create conditions for net institutional buying," said Na Seung-doo, an analyst at SK Securities. "After Chuseok, investors should pay attention to earnings at major companies and to policy developments."
