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South Korea stock slump triggers investor trauma after leveraged mania
The KOSPI benchmark is down 30% from its June 19 peak, with retail investors heavily involved in leveraged products that analysts say may drive long term disengagement.
South Korea is wrestling with the fallout from a stock market boom that turned into losses and, according to Reuters, has left many retail investors psychologically shaken. The KOSPI benchmark has fallen 30% since its June 19 peak, adding political pressure to President Lee Jae Myung's government as the decline has coincided with renewed questions about how the country can build progress toward developed market status.
Reuters reports the market rally followed efforts to make the system more dynamic by shedding regulatory taboos and encouraging bolder bets. Those changes, however, have been linked to a surge of retail participation in products many investors did not fully understand, including leveraged trading popular among Koreans known as “ants” for swarming into trades.
The article says some investors have realized severe losses and others are still nursing paper losses, while some observers warn that the trauma could cause a lasting drop in participation in investing overall. Reuters also notes rising demand for psychiatric help, as well as stress related incidents drawing attention across the country.
In addition to broader concerns, Reuters cites heightened law enforcement scrutiny, including police in Busan arresting a man in his 20s suspected of attempted murder in connection with a stabbing of a YouTuber allegedly blamed for stock losses. The report also points to President Lee taking office last year with a pledge to eliminate the so called “Korea Discount,” and it says regulators have been discussing additional steps to close perceived governance and market performance gaps.
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