Korea’s benchmark inventory index, the KOSPI, just lately soared previous the 4,000 mark for the primary time, a surge that might sign exuberant confidence in most main economies.
But, beneath the quantity, a way of tension persists, fueled by a protracted historical past of stagnation and a deep-seated concern amongst home traders that they’re higher off betting on Wall Road than on Seoul.
For years, the index had been caught between 1,800 and a pair of,100 — a protracted stretch of stagnation within the early 2010s that earned it the nickname “BoxPI,” a play on “field sample.”
Formed by their private experiences within the home market and a deep perception in U.S. shares, many younger traders stay drawn to Wall Road.
Lee Sang-min, a 30-year-old advisor, mentioned his portfolio is now solely in U.S. shares.
“Once I began investing at age 20, I put my cash into the Korean inventory market. Now, my total portfolio is in U.S. shares,” he informed The Korea Occasions.
The shift displays a broader pattern: Youthful Koreans, annoyed by restricted home returns and drawn by world alternatives, are more and more shifting capital overseas.
Between March and April this 12 months, Lee purchased Tesla shares and bought them final month, incomes roughly 30 million received ($21,000) on a 50 million received funding in simply 5 months — a return that underscores the attract of Wall Road.
Though the KOSPI just lately hit an all-time excessive, Lee is a part of a rising cohort of Koreans who place higher belief within the U.S. market and make investments primarily in American shares.
A display shows the Nasdaq brand in New York, Sept. 12. Reuters-Yonhap
In line with the Korea Securities Depository (KSD), Korean traders internet bought roughly $1.24 billion in U.S. shares in the course of the Chuseok vacation interval from Oct. 3 to 9.
That’s greater than 300 instances the quantity recorded throughout final 12 months’s Chuseok vacation, which ran from Sept. 14 to 18.
Specialists say that the U.S. inventory market’s comparatively shareholder-friendly setting is a key issue attracting Korean traders.
Kim Sang-bong, an economics professor at Hansung College, mentioned many Korean traders desire U.S. shares as a result of, in contrast to in Korea, share costs in the US have a tendency to maneuver in keeping with company efficiency.
“Current revisions to Korea’s Industrial Act have helped considerably, however for years, the share costs of Korean firms typically didn’t mirror their precise efficiency,” Kim mentioned. “Company ethics had been weak in circumstances involving spinoffs or mergers and acquisitions, and that regularly distorted valuations.”
Hwang San-hae, an analyst at LS Securities, mentioned retail traders’ notion of inventory funding has shifted from easy asset allocation to the pursuit of tangible good points, and in that sense, the U.S. market is way extra interesting than Korea’s.
Hwang added that the continuing synthetic intelligence (AI) growth is another excuse traders are flocking to U.S. equities, with the trade’s core worth chain largely concentrated in the US.
As of July, Korean traders held a document $131.7 billion in U.S. shares, up greater than 20 p.c from January.
This surge displays a broader pattern of Koreans more and more in search of alternatives overseas, with their urge for food for international markets rising markedly in recent times.
Koreans bought $260.25 billion in U.S. shares by way of KSD in 2024, a surge of practically 6,400 p.c from 2019.
Lee mentioned he started investing within the U.S. inventory market in 2022 in the course of the COVID-19 pandemic, when costs had fallen and plenty of round him noticed it as time to purchase.
After years of buying and selling in each Korean and U.S. markets, he has shifted his portfolio solely to American shares, citing stagnant returns at house at the same time as many U.S. shares surged over the identical interval.
In 2021, when the inventory value of Naver, Korea’s dominant web platform and expertise conglomerate, reached the 300,000-won vary, Lee purchased about 5 million received’s value of the shares. However the value barely moved — and infrequently fell — over the subsequent 4 years. He just lately bought his holdings, barely breaking even.
“Throughout that very same interval, U.S. indexes just like the Nasdaq and S&P 500 surged. I ought to’ve simply purchased and held American shares again then,” Lee mentioned.
In line with the Korea Change, Naver closed at 343,500 received on Jan. 22, 2021. On Monday, the inventory closed at 255,500 received — down 26 p.c over the four-year interval.
On the identical day 4 years in the past, QQQ — an exchange-traded fund (ETF) monitoring the Nasdaq index — closed at $325.42. As of Nov. 14, it had risen to $608, a rise of about 87 p.c over that interval.
The hole of roughly 113 proportion factors in efficiency underscores why many Korean traders are shifting capital overseas, favoring U.S. markets which have outpaced home returns.
Final week’s Yonhap Information Company evaluation of greater than 2.4 million NH Funding & Securities purchasers who held home inventory balances confirmed that, as of Oct. 30 — the day the KOSPI surpassed 4,100 throughout intraday buying and selling for the primary time — extra traders posted losses than good points.
Of them, greater than 1.31 million — 54.6 p.c — had been within the crimson. Their mixed losses reached 12.2 trillion received, averaging roughly 9.31 million received per investor.
An indication outdoors the New York Inventory Change marks the intersection of Wall and Broad streets in New York, Jan. 28. AP-Yonhap
Lee mentioned that the Korean inventory market holds little attraction due to the so-called “Korea low cost,” a time period referring to the power undervaluation of home firms, largely attributed to owner-centered governance and weak shareholder returns.
He added that many Korean corporations are inclined to spin off promising enterprise models for separate listings — a observe that usually drags down their inventory costs.
“Within the U.S. market, even when shares like Nvidia or Tesla fall by 20 p.c, I nonetheless consider they’ll ultimately bounce again,” he mentioned. “That’s why I hold my cash there.”
It’s a sentiment shared by Gu Younger-seok, a 30-year-old workplace employee who invests about half of his portfolio in American shares.
“I put half of my inventory belongings in Korean shares, however not as a result of I discover the native market promising,” Gu mentioned. “I’m optimistic about Korea’s protection trade — that’s the place practically all my home holdings are concentrated.”
However he stays assured within the broader U.S. inventory market.
“Shopping for an ETF that tracks the S&P 500 or Nasdaq means having religion available in the market as a complete, not simply in particular person shares. However I don’t really feel that method concerning the Korean market,” he mentioned.
A monitor exhibits the KOSPI and different market indicators at Hana Financial institution’s dealing room in central Seoul, Monday. Yonhap
Gu believes Korea’s inventory market stays opaque and weighed down by advanced possession buildings.
“For instance, Doosan’s latest plan to restructure its holdings by way of inventory swaps amongst associates drew backlash from retail traders,” he mentioned. “Lengthy-term traders want a market freed from such noise.”
Specialists say coverage reforms are wanted to make the Korean inventory market extra interesting to traders.
“The Nationwide Meeting (led by the ruling Democratic Celebration of Korea) is pushing for revisions to the Industrial Act, with the anticipated third modification more likely to mandate share buybacks and cancellations,” mentioned Hwang Sei-woon, a senior economist on the Korea Capital Market Institute.
“Such insurance policies might assist make the home inventory market extra enticing. Providing broader tax incentives, comparable to making use of a separate tax system to dividend revenue, might additional increase its attraction.”
