In recent months, many South Korean investors have faced significant financial setbacks due to a sharp decline in the country’s technology-heavy Kospi stock market index. The Kospi, known for its high volatility, has experienced dramatic fluctuations this year, with substantial gains eroded by a steep market correction between June and August. This correction has been likened to financial crises such as the Covid-19 pandemic and the 1997 Asian financial crisis.
The Impact on Personal Investors
A significant number of individual investors in South Korea have been adversely affected, as many had placed their savings into tech stocks amidst a global frenzy over artificial intelligence (AI). The index’s worth more than doubled early in the year, reaching over 9,000 points in mid-June, only to fall to 5,500 a few weeks later. Currently, it hovers around 6,800 points.
Yongjoon Kim, a bank worker, was one such investor; he lost 20 million Korean won ($14,000; £10,500) intended for his upcoming nuptials when tech stock values fell by about 25% in July. He expressed, “It’s going to sting and I’m going to have to work really hard to make up for this.” Many of his peers are in a more “desperate” situation after investing all their savings.
The trend towards leveraging, where investors borrow money to increase their stake in the market, intensified the losses. Over 1.2 million personal investor accounts in South Korea faced margin calls by the end of July, highlighting the risks associated with this strategy.
Experiences of Other Affected Investors
Woongsa Kim experienced a rollercoaster with his investments, watching shares he bought with his work bonus quadruple before the gains disappeared, cutting his investment’s value nearly in half. Another investor, Chanyong Park, invested his Nvidia profits into SK Hynix shares, only to see a $10,000 drop.
Youngji Park, opting to bet heavily on Samsung shares, witnessed a “gut-wrenching” slump. He now feels disenchanted with the market. Similarly, Soomin Yi, a college student, regrets not selling her SK Hynix shares during their peak.
Concerns Beyond South Korea
This volatility in Korean stocks has global implications, with parallels observed in other tech-heavy markets like Japan’s Nikkei 225. However, Frank Benzimra from Societe Generale notes that larger, diversified markets such as those in the USA and Tokyo are less likely to experience such severe turbulence.
For investors like Yongjoon Kim, diversifying investments has provided some protection against the market downturn. He remarked on the cautionary tale the stock market collapse represents for young investors. Despite these financial losses, his fiancée remains hopeful for recovery, though acknowledging the strain it has placed on them.
Reporting based on coverage first published by bbc.co.uk.