SEOUL, July 14 (AJP) — South Koreans are dipping into pension and long-term funds to join the stock market rush, risking their retirement nest eggs as they chase short-term returns.
The number of Koreans cashing out private retirement savings plans jumped 62.7 percent in the first five months of the year from a year earlier, while fund redemptions rose 47.3 percent, according to data submitted by the Financial Supervisory Service (FSS) and the Korea Securities Depository (KSD) released Tuesday by Rep. Song Eon-seok of the main opposition People Power Party.
The data suggests many retail investors pulled money out of long-term savings to ride the stock rally despite the risks of a volatile market.
Between January and May, 72,477 Koreans pulled out of their private retirement savings plans, up 62.7 percent from 44,554 a year earlier. Payouts from those early withdrawals rose 54.8 percent to 1.74 trillion won ($1.25 billion).
Withdrawals from investment funds also accelerated. The number of fund redemptions rose 47.3 percent from a year earlier to 1.81 million during the January-May period, while the amount withdrawn surged 146.1 percent to about 2,786 trillion won.
Song argued that the figures reflect expectations of further gains in the stock market, prompting many households to move money out of retirement savings plans and investment funds in search of higher returns. But a recent market correction, fueled by heavier foreign selling, a weaker won and the rapid expansion of single-stock leveraged exchange-traded funds, has left many of those investors nursing losses.
"Many people cashed out retirement savings plans and redeemed investment funds to enter the stock market, only to find themselves caught in rising volatility that is now putting their retirement savings at risk," Song said.
He urged the government to focus on building a stable and predictable investment environment rather than pursuing short-term measures to boost the stock market.
As of 10:09 a.m. Tuesday, the benchmark KOSPI had recovered some of Monday's losses, rising 2.22 percent to 6,958.02 after the previous session's massive 8.95 percent selloff. The junior KOSDAQ, however, slipped 0.93 percent to 791.91.
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