Hwang Seong-yeop, chairman of the Korea Financial Investment Association, expressed concerns about the recent surge in the domestic stock market, emphasizing the need for a culture of long-term and indirect investment through pensions and funds rather than direct investment by individual investors.
During a meeting with reporters on June 23 at the association's office in Yeouido, Seoul, Hwang discussed the current market situation and capital market policy challenges. He stated, "While the market may continue to rise, a correction is likely to follow an overheating phase. Above all, a soft landing for the market is crucial."
Hwang reiterated his concerns regarding the recently introduced single-stock leveraged and inverse exchange-traded funds (ETFs). He noted, "The domestic market has a high proportion of individual investors. If leveraged products for specific stocks expand, market concentration will increase, and investors may face greater difficulties during downturns."
He added, "Rather than a structure where the entire population is focused solely on investing, we should increase the proportion of institutional investors and expand indirect investments through pensions and other means. I am concerned that the expansion of leveraged products could undermine this trend."
This aligns with his vision of being a 'K-capital market evangelist,' which he outlined during a press conference marking his 100 days in office in April. At that time, Hwang suggested that the National Pension Service, retirement pensions, and personal pensions, along with Individual Savings Accounts (ISAs), should serve as another pillar for long-term asset formation.
He reiterated the importance of ensuring that retirement and personal pensions grow steadily, creating a virtuous cycle where the funds collected are supplied to domestic innovative companies.
As for expanding the role of institutional investors, Hwang proposed increasing investments in performance-based products from pension funds and nurturing long-term funds. He noted, "The proportion of performance-based products in retirement pensions has been steadily increasing, partly due to ETFs," but emphasized that, in the long run, the share of funds managed by professional managers and pension funds needs to grow further.
Regarding the recent increase in market volatility, he assessed that it also serves to mitigate market overheating. He explained, "When the stock market moves excessively in one direction, a correction phase can help investors make more rational judgments and provide new investment opportunities. Market stabilization measures, such as circuit breakers, also play a role in cooling down overheating."
Key initiatives being pursued by the Korea Financial Investment Association include revitalizing the recovery market for unlisted investments and improving tax regulations. Hwang mentioned that plans to create a secondary market to broaden the pathways for institutional investors to recover unlisted investments are in the final stages, with implementation aimed for next month.
Additionally, he pointed out the need for improvements to the education tax burden on the securities industry. He stated, "The securities industry is already bearing the burden of securities transaction taxes, and the education tax burden is being expanded. As market transactions have increased recently, the scale of the education tax is also rising rapidly, and we are discussing improvement measures with relevant authorities."
Concerning the ETF market, Hwang also addressed the recent issues of discrepancies in some products and the overheating of marketing by asset management companies, stating that the industry will work together to develop corrective measures. He remarked, "As market experience accumulates, related regulations will gradually improve, and as the ETF market grows rapidly, there must be a balance between self-regulation by the industry and efforts to protect investors."
* This article has been translated by AI.
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