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The benchmark KOSPI briefly broke the 2,000-point barrier on Tuesday, climbing above the magic figure some 18 years since it first crashed the 1,000-point hurdle on March 31, 1989. However, the benchmark index eventually closed down 0.79 points or 0.04 percent from the previous day at 1,992.26, with huge amounts of stocks put up for sale due to the psychological shock. "Money has become fearless,¡± said Oh Seok-tae, an economist with Citibank Korea, to describe the soaring stock index. Many boldly invest in stocks by canceling their savings or taking out loans. But unlike in the past, when individuals invested recklessly in unproven companies, today's investors are making calculated and rational decisions, experts say.
The timid investors of the past, who put their money into safe deposits, have turned into risk lovers and are willing to bet on stocks and funds. As a result, huge amounts of money are moving between securities companies.
¡ß Fearless money
Money is pouring into the stock market at a rate of W419 billion (US$1=W914) a day, or W19.42 million per second. This is double the speed of investments in 1999, the year of the dotcom bubble, which was W9.19 million per second. That year, about W60 trillion flowed into the stock market in total. This year, nearly as much has gone into stocks already -- some W56.2 trillion -- including stock funds like cash management accounts. The number of newly opened stock accounts has also increased 1.47 million, with a new account opening every two seconds. With orders rushing in, the Korean Stock Exchange hurriedly pledged to increase the stock market's capacity.
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An employee at the Korea Stock Exchange Market stands in front of an electronic stock board in Seoul on Tuesday. South Korean shares Tuesday breached the 2,000-level for the first time in a record run that has lifted stocks nearly 40 percent this year./AP
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Each batch of money invested in the stock market has its background -- it comes from savings accounts, deposits stashed away to buy apartments, or compensation money from the government in new town developments. Nor are individuals the only investors. Risk lovers now include government agencies, universities and fund management firms. Even the Bank of Korea, indisputably the most conservative financial institution in the country, is considering investing its foreign exchange holdings directly in overseas bourses. The National Pension Service plans to buy highly risky financial derivatives starting next year. And private universities are eagerly waiting for the law to be revised so they can invest in the stock market too.
¡ßRational risk takers
This is not the first time investors have taken risks. They did the same during the bullish markets in the late 1980s and the late 1990s. But at the time they recklessly bought stocks, any stocks, regardless of the kinds of companies. But today's investors seem to take a more calculated approach, stock experts say. Baek Kyong-ho, the president of Woori CS Asset Management, said, "Unlike in the past, investors are very rational and cool-headed."
It was low interest rates that helped turn investors into risk takers because they needed alternative ways to plan for their retirement. In other words, it was anxiety about the future that made them take risks. Experts say this time, risk-taking is therefore not just a temporary phenomenon: it¡¯s not just a mere transfer of individuals' money but a more fundamental change in their mindset. The KOSPI at 2,000 points ¡°signifies that individuals' assets are being transferred from savings to stocks and funds."
Risk-taking is expected to grow further. Despite interest rate hikes, investors now have more acute judgment, and household financial assets will likely move into various investment portfolios. In the U.S., stocks and funds already account for 44 percent households¡¯ financial assets, while in Korea this is only 27 percent. Chung Young-woan, chief of Samsung Securities' investment strategy center, has a word of warning. "It¡¯s never a good idea to invest recklessly in stocks by taking out loans and canceling insurance contracts,¡± he says. ¡°You need to make portfolios of investments rationally, distinguishing between risk assets and safe assets."
(englishnews@chosun.com )
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