Foreign Media Highlights Retail Investors’ Outrage: "Blaming President Lee, Vowing Never to Buy Korean Stocks Again"

Bloomberg Analyzes the July "Roller-Coaster KOSPI"

Collapse in Investor Sentiment...Confidence May Take Years to Recover

Lee Administration Faces Criticism Over Launch of Leveraged ETFs

On May 29 last year, then Democratic Party presidential candidate Lee Jae-myung held an economic recovery performance by mentioning the "KOSPI 5000 era" during a campaign rally held in front of the Express Bus Terminal in Seocho-gu, Seoul, covering Seocho-gu and Gangnam-gu. Photo by Yonhap News Agency

In July, the unprecedented volatility that rocked the Korean stock market has rapidly dampened individual investors' sentiment. Even Korea's retail investors, once known for their aggressive risk appetite, are now turning their backs on the market after a month marked by repeated sharp plunges and sudden surges. Foreign media outlets interpret this situation not as a simple correction, but as a signal of a "collapse of trust," warning that it may take much longer to restore investor sentiment than for the index to rebound.

"Not a market, but a casino"... Signs of retail exodus

On August 2 (local time), Bloomberg published an article titled, "Crushed by Kospi Rout, Angry Koreans Rip Lee and Vow Not to Buy," which closely examined the drastic deterioration in sentiment among Korean retail investors.

Earlier in July, the KOSPI plunged by 22% over the course of a month, recording its largest drop since the global financial crisis. Even though there was a technical rebound with an 18% surge on the last trading day of the month, retail investors exited the market in record fashion, making the biggest net sales ever that day.

The outlet featured an interview with Mr. Han-Kyung Kim, a resident of Seoul in his late 30s. He explained that he first started investing in Korean stocks in early May, but has now decided never to invest again. "At that time, it was the era of the KOSPI craze. I was completely swept up in the frenzy," Kim said. "But honestly, right now it's terrifying." He added that he has engraved two rules in his mind: The first is not to invest in Korean stocks, and the second is to stick to the first rule.

Across the market, there is growing criticism that "the Korean stock market is no longer an investment platform but is more like a casino." Dongwoo Kim, who has more than seven years of investment experience, also pointed out, "This level of volatility means the market is not functioning normally."

After 78 Trillion Won Inflows, Sharp Decline... Leverage ETF 'Matchstick' Debate

Bloomberg analyzed that after the government allowed single-stock leveraged ETFs, approximately 78 trillion won (54.2 billion US dollars) flowed into the KOSPI between May and June. However, as volatility increased, these products ended up exacerbating the market crash.

Mr. Jung-min Lee, who took out a 50 million won loan secured by his apartment for investment, criticized, "The government poured gasoline on the fire with leverage ETFs, turning the stock market into a casino."

Lale Akoner, global market analyst at eToro, said, "This is a textbook case of what happens when crowding trades meet leverage," and predicted, "Deleveraging will not end within a few days, and there is a high likelihood of continued large swings in tech and semiconductor stocks going forward."

Policy response "too late"... Rising political risk

The government's response has also come under fire. Only in mid-July did the financial authorities suspend the listing of new single-stock leveraged ETFs and tighten regulations by raising the minimum deposit from 10 million won to 30 million won. However, among retail investors, criticism has spread that the authorities are "locking the barn after the horse has bolted." More than 35,000 people have signed a national petition, and the political arena has also raised the issue of policy responsibility.

Bloomberg evaluated that this crisis "strikes at the heart of President Lee's political brand," and "serves as a test for President Lee's 'KOSPI 5000' initiative and push for capital market reform." The policies emphasizing shareholder value and market modernization have ironically become subject to criticism that the market is now 'speculative' in nature.

On the 29th of last month, the KOSPI index was displayed in the dealing room of the Seoul Hana Bank headquarters. Photo by Yonhap News

Bloomberg reported that although the AI boom continues and the KOSPI has recorded one of the highest returns among major global stock markets this year, regaining the trust of retail investors, once lost, could take much longer than a mere stock price recovery. Jeong Eui-Jung, head of the Korea Stock Investors' Association, told Bloomberg, "Individual investors are furious with the government," adding, "The anger and criticism have reached their peak."

This content was produced with the assistance of AI translation services.