South Korea’s equity market has tumbled from its year-to-date highs, erasing
about $1.7 trillion in market value and provoking strong retail investor
backlash that tests President Lee Jae-myung’s policy to shift household funds
from property into stocks. Lee pledged during the campaign to lift the KOSPI to
5,000. Driven by AI flows the index hit a record 9,114.55 before reversing. On
Friday KOSPI plunged as much as 8.8% intraday, breached the 5,000 level and is
down more than 40% from its June peak. Retail investors say they heeded
government encouragement to abandon home purchases and move into equities and
have suffered large losses; Seoul house prices have nevertheless risen for 91
consecutive weeks. One investor said a 40 mln won allocation to a small-cap
index fund has lost about 65% of its value. The market setback is intensifying
criticism of government policy.
