[Column by Son Sung-jin] A Time for Investors and the Government to Be Cool-Headed

A stock market frenzy has swept across the country. Few people expected the long-neglected South Korean stock market to grow this much. Those who had the nerve to invest for the long term may have made the kind of money they had never touched before. Many others who did not join that rush are now feeling a sense of relative deprivation. It is a moment when both the government and individual investors have much to think about.
For young people who see little hope of building wealth, stock investing has become a golden opportunity. Faced with the reality that even a lifetime of saving may not be enough to buy an apartment, many young people have rushed into stocks. It is similar to the venture boom of more than 20 years ago. Some have succeeded and earned money for a home. How much of that opportunity remains now is something that must be judged with a cool head.
A considerable number of investors have probably suffered losses. Some may have bet on a big payoff, only to fall into ruin instead. If more than half of investors are in the red, then policies aimed at boosting stock prices have ultimately harmed asset accumulation.
Foreign experts often view Korean stock investing as speculation and gambling. That is because people use debt-driven investing, leverage, and margin trading without much hesitation. This tendency among Korean investors is also clearly visible in the U.S. market. Some may be fortunate enough to earn large profits, but many others are likely on the opposite side of that outcome.
The market is swinging wildly. With buy-side and sell-side circuit breakers being triggered on alternating days, the stock market has become an unpredictable roller coaster. In times like these, speculators run wild and the market turns into a winner-takes-all casino. When investing degenerates into speculation, it becomes a social evil that damages a healthy economic climate.
Speculation destroys the sacred value of labor. Once people are drawn into a gambling-like market where they can make or lose millions of won in a single day, work and occupation may start to seem meaningless. It is not encouraging when people quit their jobs after seeing the chance for high returns. If losses make it impossible to focus on work, that is a loss for both companies and the country. Before that, it is also harmful to an individual's mental health.
It is also time for the government to look at the market with a cool head. The government should not be encouraging speculation. It deserves credit for helping normalize the undervalued South Korean stock market. But there is also an element of deliberate support. Allowing leveraged exchange-traded fund (leveraged ETF) products has contributed to sharp market swings. On the one hand, people are told not to engage in debt-driven investing; on the other, they are being encouraged to do exactly that. The timing of the policy was also far too late.
New governments usually try to boost the stock market. If everyone could make money through stock investing, that might seem harmless. When household assets rise, consumption can increase and growth can improve. But it is not without side effects. One example is that money earned in the stock market has flowed into the real estate market, working against housing price stability. Data show that 3.7254 trillion won from stock and bond sales between January and April this year was funneled into the housing market.
Of course, making money and buying an expensive house is an investor's gain. But that runs counter to policies aimed at stabilizing real estate.
What about the National Pension Service's stock investments? President Lee Jae-myung said that when stock prices rise, even people who did not invest benefit. His point was that the pension fund, which is facing depletion risk and serves as retirement savings for the entire nation, made money through investing. But the gains he refers to are unrealized gains, or valuation gains. Only when NPS actually realizes those gains do people truly benefit. It is true that NPS has made profits, but realizing them is difficult. The moment NPS starts locking in gains, there is a high chance that stock prices will plunge.
Like previous administrations, the current government is also using NPS as a tool to support stock prices and stabilize the won. It raised the ceiling on NPS domestic stock purchases for the first time in decades. NPS has been a key factor behind the sharp rise in stock prices. The timing of NPS rebalancing, or selling, is a major issue. Its share should be reduced gradually. If selling is delayed any further, it could amount to passing a bomb to the next administration.
The government should now focus more on market stability than on propping up stock prices. A sharp rise can eventually lead to a sharp fall. Of course, the KOSPI could surpass 10,000, or it might not. It is hard to predict. In that situation, it is not the time to encourage people to assume it will keep rising. Securities companies and financial institutions are no different. Overly rosy forecasts can cause investors to lose money. It is true that the final responsibility for investing lies with the investor. Even so, it is irresponsible for the government or financial institutions to encourage investing for their own benefit.
tonio66@fnnews.com Reporter