UNDERMINING BRAND KOREA?
The breathtaking rally has been powered by a staggering 300 per cent surge in the stock market’s earnings growth over the past year, led by gains for the memory stocks, and has made up for decades of measly single-digit returns. Koreans saw their stock market wealth shoot up from US$1.5 trillion to US$5 trillion, gaining more in 18 months than they had in a lifetime.
Their enthusiasm for trading is on equally vivid display in global markets. Cryptocurrencies often sell in Seoul at what’s known as the “kimchi premium,” owing to intense demand from locals. When crypto prices surged in 2024, trading volume was actually higher in Korean won than in US dollars. As AI mania spread, Koreans poured billions into the markets not only at home but also in the US, where they form the largest cohort of foreign retail buyers.
After the summer correction, Lee’s administration took steps to restrain stock speculation, which has been linked to a broader gambling culture with hard-to-kill societal roots. Laws ban Koreans from most forms of gambling at home or abroad, and all but one of the nation’s 18 casinos are closed to locals. Yet they are known to drop billions a year in casinos online and across Asia. The government has cut lottery payouts to record lows, but sales keep surging to new peaks.
A recent paper by Hanyang University academics linked South Korea’s “marked preference” for high-risk “lottery-type” stocks to its rates of both gambling addiction and suicide, which are among the highest in the world. A trading culture that chases jackpots diverts capital from more productive investments, including the nation’s many solid companies. Those firms would attract more money from abroad too, if international investors were not so leery of the flighty market.
What happens in the world’s sixth-largest market matters far beyond its borders. With roughly 75 per cent of corporate earnings generated abroad, the Kospi has long been an early bellwether for global bull and bear markets. But its increasingly unhinged behaviour is undermining brand Korea.
