From euphoria to despair, Korea reckons with stock mania's emotional toll

South Korea is grappling with the emotional and psychological fallout of a stock market boom that has turned into a significant downturn, leaving investors traumatized. The KOSPI benchmark has plummeted 30% since its June 19 peak, a sharp reversal that has inflicted considerable financial and emotional pain on retail investors, locally known as 'ants' for their tendency to follow trends en masse.

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Ultimately many who entered the market may have suffered severe losses, and a majority of them could become so traumatised that they lose interest in investing altogether.

The market's volatility has created political challenges for President Lee Jae Myung's administration, which had aimed to enhance the stock market's dynamism. The focus has shifted to an economic system that seemingly encouraged retail investors to dive into poorly understood leveraged products. This situation raises questions about South Korea's progress toward developed market status when such extreme retail investor behavior is evident.

Beyond the realized and unrealized losses, a profound psychological reckoning is underway. Demand for mental health services is reportedly rising, and instances of extreme stress are surfacing. In Busan, police arrested a man in his 20s suspected of attempted murder, allegedly blaming a YouTuber for his stock market losses.

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Why is something permitted on the NASDAQ not allowed in Korea?

President Lee's government had pledged to eliminate the "Korea Discount" – the tendency for local stocks to underperform global peers due to corporate governance issues. In pursuit of this goal, regulators discussed and subsequently approved single-stock leveraged exchange-traded funds in May. Despite internal concerns about domestic investors' understanding of the risks, the products were launched with minimal barriers to entry, including a brief training course and a modest deposit requirement. The government maintains its commitment to market stability.

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The government remains committed to maintaining market stability.