Major global media outlets are expressing 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 the "Rollerkospi." The report described it as having become a "ride of fear."
The WSJ's characterization of the "Rollerkospi" is not without merit. Once considered the hottest market globally last year, the South Korean stock market plummeted nearly 40% over six weeks in June and July, erasing $2.5 trillion in market capitalization. Prior to this, 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 rather a structural increase in volatility. The rally in AI semiconductor stocks saw Samsung Electronics and SK Hynix at one point account for over half of the total market capitalization of the KOSPI. This concentration of market fate on specific sectors and stocks raises concerns about the market's structure. Additionally, the fact that individual investors, who account for 60-70% of daily trading volume, have resorted to leveraged products has further exacerbated market volatility, according to both outlets.
The WSJ report highlights that extreme volatility has significantly increased investor losses. It features stories of individuals who quit their jobs to invest half of their severance pay in semiconductor stocks, only to incur losses within a week. Another investor, who initially made a 40% profit in three weeks, later faced a 69% loss after reinvesting in leveraged products. Such experiences are becoming increasingly common among investors.
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 measures to mitigate volatility as needed, while consistently pursuing fundamental improvements 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 has achieved significant growth, breaking out of a long stagnation and recording the highest growth rates among major countries for two consecutive years. This achievement is not unrelated to the drive for capital market reform. However, it is understandable that foreign media referring to the market as a "casino" or "Rollerkospi" may feel unjust.
Nevertheless, it is an undeniable fact that the government has contributed to market overheating. In its rush to introduce high-risk leveraged products to achieve the target of a KOSPI of 5,000, it 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 a case of "self-inflicted wounds," the government has not managed the situation well enough to avoid accountability.
Before refuting foreign media reports, the government should focus on the issue of "trust." Although volatility has decreased, the KOSPI continues to experience fluctuations in August. As this high volatility persists, the trust 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 rebuttals 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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