Signs of "euphoria," or unfounded optimism, are emerging in South Korea's stock market after a more than 200% surge over the past year, according to foreign media analysis. Retail investors taking on debt to invest are exhibiting fear-of-missing-out (FOMO) sentiment at extreme levels.
Bloomberg on Tuesday (local time) spotlighted recent conditions in the Korean stock market, diagnosing that a speculative frenzy is sweeping across the market.
At the center of the recent KOSPI surge are Korean semiconductor companies benefiting from the artificial intelligence (AI) boom. Samsung Electronics and SK hynix have posted record earnings as key players in the AI supply chain, while the Lee Jae-myung administration's financial and capital market reform policies have added further momentum to the rally.
Backed by these factors, the Korean stock market has risen to become the world's seventh-largest, and Samsung Electronics became the second Asian company to surpass $1 trillion in market capitalization.
As the market rally continues, FOMO sentiment among retail investors is spreading rapidly. Retail investors, who were on the sidelines last year, have returned to the market en masse this year, net-buying approximately 37.7 trillion won so far this year.
A particularly notable trend is the surge in investing among minors. According to Toss Securities, new stock account openings by minors under 18 in the first quarter of this year increased nearly tenfold from a year earlier.
The problem lies in excessive leverage expansion. According to the Korea Financial Investment Association, margin loan balances for stock purchases swelled to a record 36.3 trillion won as of early May. That marks an approximately 32% jump from the end of last year.
Experts attribute the recent speculative frenzy in part to social anxiety. Choi Jae-won, a professor in the Department of Economics at Seoul National University, said, "There is a growing perception that upward social mobility is no longer possible through traditional means," adding, "Investors who have seen people become rich overnight through cryptocurrency are now flocking to stocks, viewing them as a means of rapid wealth accumulation."
Bloomberg also cited the case of Kim Yong-beom, head of the Presidential Office's Policy Planning Office, who on the 12th mentioned on social media the possibility of a "national dividend" funded by AI-related excess tax revenue. The market mistook this as effectively a signal of a "windfall tax" introduction, and the KOSPI plunged nearly 7% intraday in an instant. The index recovered much of the decline after the government clarified that it was a "personal opinion."
However, major Wall Street investment banks remain optimistic, citing continued earnings improvements at Korean companies. Some institutions have set their KOSPI year-end target as high as 10,000.
Kyle Lee, a retail investor who liquidated all his Korean stocks earlier this year and is now focused on Nasdaq futures, told Bloomberg, "Of course I feel FOMO, but with stocks continuously hitting new highs, I have no plans to buy back in." He added, "If a correction comes, it will be very steep."
