South Korea's financial regulator has taken the unusual step of issuing an official rebuttal after a Bloomberg column suggested the country's stock market could be deemed "uninvestable." The government pushed back directly, calling the assessment one "based on statistics with unclear grounds," and stressed that Korea's market fundamentals are actually strengthening, led by artificial intelligence and semiconductors.
"An Uninvestable Country?"—FSC Issues Official Rebuttal
The Financial Services Commission (FSC) released a statement titled "The Government's Position on the Domestic Stock Market" on the night of the 4th, formally rebutting a recent Bloomberg column by columnist Shuli Ren titled "South Korea is Becoming Uninvestable, Too."
In the column, Bloomberg noted that the KOSPI had plunged about 40% in just 27 trading days from its peak in June, a level comparable to the Chinese stock market crash of 2015.
The column introduced an optimistic view based on the undervaluation appeal of Samsung Electronics and SK hynix, but stated, "I don't agree with such a simplistic argument." It went on to say that the government's stock market stimulus policies and the introduction of single-stock leveraged ETFs had amplified market volatility and left retail investors traumatized.
It also argued that the KOSPI had moved more than 5% in a single day on 33 occasions this year, compared with four days for Japan's Nikkei 225 and none for Hong Kong's Hang Seng Index, contending that the high volatility of Korea's stock market was a factor driving foreign investors away.
Pointing to the National Pension Service's adjustment of its target weighting for domestic stocks and the single-stock leveraged ETF policy as problems, it criticized that "the government should reflect on what it is doing and whether young, first-time investors are being properly protected."
"360,000 Margin Call Accounts Not True…Grounds Unclear"
The FSC rebutted the column's core basis as being inconsistent with the facts.
The FSC said, "The statistics presented in the column do not match the facts and their exact sources cannot be confirmed—for example, citing 360,000 accounts when margin calls averaged about 3,000 accounts per day during June."
It stressed, "At a time when Korea is emerging as an irreplaceable supply chain and investment destination in the global AI market, there is no concern whatsoever that it would be assessed as an uninvestable country based on figures with unclear grounds."
It also explained, "The Korean economy is showing its most solid appearance ever in terms of fundamentals such as gross domestic product (GDP) growth rate and current account balance," adding, "On expectations for the AI and semiconductor industries, domestic companies' projected earnings have risen even higher than when share prices were at their peak, and many investment banks (IBs) at home and abroad are also placing weight on Korea's growth potential."
According to FnGuide data cited by the FSC, the earnings estimate for KOSPI-listed companies this year rose from 930 trillion won on June 22, when the KOSPI hit its peak, to 978 trillion won as of the previous day.
"Market Volatility Stabilizing"…Leveraged Trading Also Plunges
The FSC said the recent expansion in market volatility was also the result of various factors working together in combination, stating that "the market's assessment is that there have recently been signs of recovering investor sentiment."
In particular, regarding the controversial single-stock leveraged products, it explained that trading has been stabilizing quickly since the implementation of supplementary measures such as raising the basic deposit requirement.
Indeed, according to the FSC, the trading value of single-stock leveraged products was tallied at 1.3 trillion won the previous day. This represents a significant decrease compared with 12.4 trillion won on the 30th of last month, before the basic deposit increase measure, and 19.4 trillion won on June 25, when it hit its peak.
The FSC said, "We are doing our best to manage volatility, and we plan to consistently pursue improvements to the capital market's fundamentals that enhance the stock market's resilience and growth potential while managing short-term volatility."
