Korean retailers who used to short-term investors are here to stay and likely usher the Kospi into 3,000 territory.

Flush with dry powder amid record-low interest rates, individual investors in Korea net bought 47.4 trillion won ($43.7 billion) worth of shares in 2020, driving the country’s benchmark index above a record 2,800. Experts say the Kospi could even surpass the 3,000-threshold this year, given more than 100 trillion won parked in stock accounts and strong corporate rebound anticipated this year.

A Bank of Korea (BOK) study in March 2020 showed that 76.4 percent of assets held by Korean households were in the form of real assets including real estate. Financial assets including savings, stocks and funds accounted for only 23.6 percent. This held true even during the 2008 global financial crisis.

But a dramatic shift was seen during the coronavirus pandemic last year. Of the total 60.5 trillion won in household operating assets, stocks and funds accounted for negative 5.4 trillion won in the fourth quarter of 2019. This shifted to positive 3.2 trillion won of the total 81.8 trillion won by the first quarter of 2020, with individuals net purchasing 20.5 trillion won worth Kospi stocks. In the second quarter, investment in stocks and funds surged to 21.3 trillion won from 2.8 trillion won in the same period a year ago.

With interest rates at a record low, bank savings are quickly falling out favor, making more people turn to stocks and other riskier assets.

Real estate, which had traditionally been a major vehicle for building wealth in Korea, is also becoming out of reach for most Koreans amid the latest asset bubbles and loan regulations.

The average selling price of an apartment in Seoul rose to 893 million won in late 2020 from 827 million won in late 2019. Of the 25 Seoul districts, only four had an average selling price of above 1 billion won in late 2019. But this climbed to seven within a year.

Homes that cost more than 1.5 billion won are no longer eligible for bank loans as the government tightened housing regulations to rein in the runaway prices.

By Moon Ji-woong

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]