DistantNews
Support us
🇰🇷 South Korea /Economy & Trade

South Korea's stock market gamble: Government's focus on gains fuels volatility and distrust

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

Analysis Sources not specified Context piece
  • South Korea's stock market experienced a dramatic surge and subsequent sharp decline, impacting investors' fortunes.
  • The government's encouragement of stock investment and the introduction of leveraged ETFs are criticized for exacerbating market volatility.
  • Critics argue the government should focus on financial investment income tax (FII) and fair labor income, rather than solely promoting stock market gains.

South Korea's stock market has become a volatile arena, mirroring the rise and fall of President Lee Jae-myung's political fortunes, according to a commentary in the Hankyoreh. The article criticizes the government's focus on stock market performance as a measure of national success, arguing it has led to risky investment behaviors and significant investor losses.

No South Korean president has ever tied their political destiny as closely to the stock market as President Lee Jae-myung.

— Financial TimesQuoted in the article to describe the president's focus on the stock market.

Initially, the market surged, with the KOSPI index surpassing 5000 and later reaching over 9000, fueled by strong corporate profits, particularly in semiconductors. This period saw a frenzy of retail investment, with many individuals investing savings, retirement funds, and even marriage deposits. However, the market experienced a sharp correction, losing nearly 40% in just over a month, leading to widespread financial hardship for investors and a decline in the president's approval ratings.

The stock market became like a casino.

— Hankyoreh commentaryDescribing the impact of leveraged ETFs and market volatility.

The commentary points to the government's decision to allow leveraged Exchange Traded Funds (ETFs) as a key factor in amplifying market volatility. Despite signs that retail investors were already returning to the domestic market, the government proceeded with introducing these high-risk products, which magnified losses during the downturn. The article suggests the government's continued promotion of stock investment, even after the crash, and its hesitation to implement a financial investment income tax (FII) demonstrate a skewed policy focus.

The final responsibility for investment must be borne by oneself.

— Hankyoreh commentaryAnticipating the government's likely response to investor complaints.

Instead of prioritizing stock market performance, the article argues the government should focus on ensuring fair labor income and implementing a progressive tax system, including the FII. It criticizes the government's perceived "double standard" in addressing capital gains, particularly its comments on real estate capital gains tax while overlooking stock gains. The piece concludes by questioning whether the current administration is building a "people's house" where all citizens can prosper or a "house of chance" driven by speculative gains, referencing a critique of the era's focus on "unearned income."

There is no situation where the expression 'double standard' is more appropriate than this.

— Hankyoreh commentaryCriticizing the government's approach to capital gains taxes.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

More Stories

From Our Blog