South Korean investors face ruin as market crashes

A South Korean office worker, identified only by his surname Kim, expressed despair over the current market downturn, stating it's worse than the 1997 financial crisis. "Everyone is talking about how much money they've lost," Kim told the JoongAng Ilbo newspaper.

The main South Korean stock index, Kospi, plummeted on Wednesday, triggering automatic trading suspensions twice before closing nearly 6 percent lower. Kim revealed he invested over 3 million won (about 1,800 euros) in stocks during a market dip, only to see them fall further. "I have no money left, so I can't do anything," he lamented.

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I had never thought I would experience a stock market crash worse than the 1997 financial crisis.

This financial distress contrasts sharply with the recent optimism among South Korean retail investors. The booming demand for memory chips, driven by artificial intelligence advancements, had previously sent the stock prices of local giants Samsung and SK Hynix soaring. Bloomberg Economics reported in May that these two companies were projected to contribute 2.7 percentage points to South Korea's economic growth this year. Employees at these firms saw bonuses and profit-sharing payments reach up to six times their annual salaries, though a strike threat was needed to secure such payouts at Samsung.

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Everyone is talking about how much money they've lost.

However, retail investors also jumped in, pouring money into Samsung and SK Hynix shares, which accounted for over 80 percent of trading volume on some days this year. Despite Samsung reporting a quarterly profit of 54 billion euros on Thursday, nineteen times higher than the previous year, its stock fell after investors anticipated even greater gains. SK Hynix also saw its stock pressured after reporting record revenue of 42 billion euros the day before, as the market reacted to unmet expectations.

Many South Koreans increasingly view investing as a way to secure their financial future, as wage growth lags behind high living costs and soaring property prices make homeownership unattainable. The government, under President Lee Jae-myung, has actively encouraged investment through incentives, including tax benefits. The country, with about 52 million people, now has an estimated 14 million retail investors. The current crisis is exacerbated by the fact that many have opted for potentially lucrative but high-risk investment products. The Kospi index had reached a peak of 9,115 points in June, more than triple its value a year prior, fueling this speculative fervor.

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I invested more than 3 million won [about 1,800 euros] in stocks when prices were falling. But they fell even further today. I have no money left, so I can't do anything.