Seoul dismisses 'uninvestable' market claims, defends economic strength

South Korea's Financial Services Commission (FSC) has responded to a critical Bloomberg column that labeled the nation's stock market as increasingly 'uninvestable.' The column cited government intervention and market volatility as key concerns, drawing parallels with China's investment challenges.

In a statement released late on April 4, the FSC vehemently disagreed with the assessment. The commission emphasized the robust health of the South Korean economy and asserted that the country remains a "non-substitutable investment destination." The Bloomberg article, authored by columnist Shuli Ren, argued that recent government actions, such as the introduction of single-stock leveraged products and adjustments to the National Pension Service's (NPS) domestic stock allocation, have fueled market overheating and increased investor risk.

The FSC challenged the article's assertion that South Korea is becoming difficult to invest in, similar to criticisms leveled against China due to policy failures and a lack of investor consideration. The commission countered that domestic companies' projected earnings have improved compared to previous stock market peaks. It attributed the recent market volatility to a complex interplay of factors and noted signs of investor sentiment recovery.

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South Korea is a non-substitutable investment destination.

Regarding the leveraged products, the FSC stated that complementary measures are showing positive effects. However, the commission took issue with specific statistics cited in the Bloomberg column, particularly those concerning forced liquidations. The article claimed approximately 360,000 securities accounts were forcibly liquidated, with 62% belonging to investors under 35. The FSC refuted this, stating that the average daily number of accounts subject to margin calls in June was around 3,000. Over 21 trading days in June, this would amount to approximately 63,000 accounts, a figure significantly different from the 360,000 reported.

While the FSC did not offer a direct explanation for the National Pension Service's adjustments to its domestic stock holdings, an issue highlighted by Bloomberg as potentially contributing to market overheating, it focused its rebuttal on the overall economic strength and the accuracy of market data. The commission stressed that South Korea's economic fundamentals are stronger than ever, positioning it as a unique and resilient investment market.

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The number of accounts subject to reverse trading (forced liquidation) was about 3,000 per day on average in June.