[Donghak Ant One Month] Ends as a 'Brief Trend'? Changing the Stock Investment Game

"Funds Entering Amid Negative Perception of 'Risk' Will Remain in the Market"

[Asia Economy Reporter Park Jihwan] Market attention is focused on whether the 'Donghak Ant Movement' will end as a fleeting trend or bring about a paradigm shift in investment. The prevailing view is that it will serve as an opportunity to change the household asset structure from being centered on real estate to focusing on financial products.

According to the Korea Exchange on the 20th, individual investors have net purchased stocks worth 12.7884 trillion won over 30 trading days from the 5th of last month to the 16th of this month in the KOSPI market. Investor deposits, which are standby funds for entering the stock market, reached 45 trillion won as of the 17th. This is an increase of about 60% from the 28 trillion won scale in January this year. Market interest is focused on whether this stock investment boom will lead to a change in the household asset structure centered on real estate. As of the end of 2018, the proportion of real estate in total assets per household in Korea was 76%. In contrast, net financial assets, which are financial assets minus financial liabilities, accounted for only 22.2%. Most household assets are concentrated in real estate.

Experts believe that the inflow of individual investors' funds into the stock market will continue for the time being and that this will be a signal for a change in the household asset structure. Kim Yonggu, a researcher at Hana Financial Investment, said, "Considering that individuals net sold 76.6 trillion won in KOSPI alone from 2000 to 2019 due to repeated failures and accumulated trauma by going against the index trend, this is an unusual move," adding, "It will be a historic turning point that shakes off distrust in individuals and households toward KOSPI large-cap stocks and indirect investment institutions such as active equity mutual funds."

Signs of changes in various indicators are also positive for the inflow of household funds into the stock market. According to the Seoul Institute, the Housing Purchase Attitude Index of Seoul citizens in the first quarter of this year recorded 52.8, the lowest since the survey began in 2009. This index is based on 100; a higher score means that demanders are positive about purchasing houses, and a lower score means the opposite. The proportion of real estate assets among wealthy individuals is also decreasing.

According to the '2020 Korea Wealth Report' prepared by Hana Financial Management Research Institute based on a survey of 393 people with financial assets of over 1 billion won, the proportion of real estate in their assets fell to 50.9% last year from 53.1% the previous year. After the real estate proportion dropped to 44% in 2013, it had been on the rise but has now turned to a decline for the first time.

It is still premature to discuss a full-fledged investment paradigm shift, and many voices emphasize the significance of changing the negative perception of stock investment. Hwang Sewoon, a research fellow at the Capital Market Research Institute, explained, "If, after some time, many cases show returns of 30-40% from the Donghak Ant Movement, it will be an opportunity to change the perception that 'stocks are risky,' and the newly entered funds are likely to remain in the stock market."

John Lee, CEO of Meritz Asset Management, said, "Through this opportunity, investors will recognize that stocks have higher returns than real estate," pointing out, "Although stock returns have continuously trended upward, there was an optical illusion that stocks were worse than real estate due to volatility."

Heo Jaehwan, head of the Global Macro Team at Eugene Investment & Securities, emphasized, "The stock prices of domestic companies have shown lower dividend yields compared to Japan or China, where dividend rates are not high," and added, "We must not miss this opportunity, where the inflow of funds into the stock market is rapid due to more aggressive dividend policies."