Major international media outlets are expressing growing concerns over the volatility of the South Korean stock market. On August 24, the Wall Street Journal (WSJ) referred to the South Korean market as "the world's craziest stock market," noting that investors have dubbed it "Rollerkospi." The report described it as having become a "ride of fear."
The WSJ's characterization of "Rollerkospi" is not without merit. Once considered one of the hottest markets globally last year, the South Korean stock market plummeted nearly 40% over six weeks in June and July. During this period, the market lost approximately $2.5 trillion in market capitalization. Earlier, Bloomberg pointed out on August 3 that "South Korea is Becoming Uninvestable, Too," highlighting the risks associated with the market's extreme volatility.
Both reports emphasize that the core issue is not merely fluctuations in stock prices but a structural increase in volatility. The fact that Samsung Electronics and SK Hynix, two semiconductor stocks, at one point accounted for over half of the total market capitalization of the KOSPI indicates a problematic market structure where the fate of the entire index hinges on specific sectors and stocks. Additionally, the heavy involvement of individual investors, who account for 60-70% of daily trading volume and often utilize leveraged products, has further exacerbated market volatility.
The extreme volatility has significantly increased investor losses. The WSJ reported on investors who quit their jobs to invest half of their severance pay in semiconductor stocks, only to incur losses within a week. Another investor, who made a 40% profit in three weeks, later reinvested in leveraged products and faced a 69% loss. Such stories are becoming increasingly common.
In response to the WSJ report, financial authorities issued a statement emphasizing the "highest level of growth" and a "stabilization trend." They also stated, "The government will closely monitor the stock market situation and implement volatility reduction measures as needed while consistently pursuing fundamental market reforms to build a resilient capital market." This stance was similar to the one taken during Bloomberg's report on August 3.
While the government has much to say, it cannot deny that the South Korean stock market's recent performance, which has broken out of a long stagnation to achieve the highest growth rates among major countries for two consecutive years, is a significant achievement linked to capital market reforms. However, it is understandable that international media refer to the market as a "casino" or "Rollerkospi."
Nevertheless, it is an undeniable fact that the government has contributed to market overheating. The rush to introduce high-risk leveraged products to achieve the "KOSPI 5000" target overlooked the structural characteristics of the South Korean market, which has a particularly high proportion of individual investors and significant concentration in specific stocks. While it may not be entirely fair to say the government is reaping what it has sown, it cannot evade responsibility for its management practices.
Before refuting foreign media reports, the government should focus on the issue of "trust." Although the volatility has decreased, the KOSPI continues to experience fluctuations in August. As this high volatility persists, the confidence of long-term investors and foreign capital in the South Korean stock market is bound to decline. The sighs of domestic individual investors are likely to grow louder.
Trust is built not through rebuttal materials but through the ability to manage volatility. Instead of merely repeating that the stock market is sound, the government should seriously consider and deliberate on policies to reduce volatility.
* This article has been translated by AI.
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