[Inside Chodong] President Lee's "KOSPI 5000": How to Avoid Empty Ambitions

Skepticism Remains as Stocks and Housing Prices Rise Together
Stronger Policy Signals Needed to Avoid Repeating Past Failures

The domestic stock market is experiencing a true bull run. The KOSPI has soared past 3,500 points and at one point even exceeded 3,600 points, setting an all-time high. With the moving averages maintaining a bullish alignment, the momentum is impressive. Although the stalled Korea-U.S. tariff negotiations, caused by the unreasonable demands of the Donald Trump administration, are a burden on the Korean economy, the stock market appears to be reacting more strongly to positive factors than to negative ones.

The main positive factors are, without a doubt, President Lee Jaemyung's confidence in declaring, "Do not expect to make money from real estate," and his ambition to usher in the "KOSPI 5000 era," making the stock market a means for retirement planning and asset growth. There are also high expectations for attracting foreign investment into Korea's artificial intelligence (AI) industry. In a meeting with senior aides on October 2, President Lee stated, "The trend itself does not seem likely to change easily." Larry Fink, Chairman of BlackRock, and Sam Altman, CEO of OpenAI, have both pledged to invest in Korea's AI industry.

Are individual investors, who had been watching with skepticism, now starting to feel a sense of anticipation? The amount of deposits, which can be interpreted as standby funds for stock investment, was only in the 50 trillion won range at one point in 2023, but has now increased to about 76 trillion won. This is approaching the record high of 77.9018 trillion won set during the Moon Jae-in administration. The number of securities accounts has also surpassed 93.33 million (compared to 90 million in May).

Judging by the atmosphere, it seems the "KOSPI 5000 era" could arrive soon, but there are still unwelcome trends. One such trend is that housing prices, which are typically the "opposite" of the stock market, have also soared. Applying the legendary investor Andre Kostolany's "egg model," it appears that the preference for both stock and real estate investment is occurring simultaneously during this period of falling interest rates. In Korea, this has often led to a stronger focus on real estate. Therefore, it is premature to say that the recent surge in the domestic stock market is due to "real estate investment capital moving into the stock market" as President Lee hopes, or that "increased liquidity has chosen the stock market over real estate."

Compared to the "6·27 Measures," the "9·7 Measures" did not have a significant impact on the real estate market. In fact, housing prices in some parts of Seoul, which had stalled, have risen at a faster pace since the "9·7 Measures." Just before Chuseok, the increase in Seoul housing prices was 0.27%, returning to the level seen just before the "6·27 Measures" were announced. If this trend continues, the market may recall the Moon Jae-in administration, which turned those who trusted and followed the government's policy of stabilizing housing prices into "lightning beggars" (suddenly impoverished).

Clear policies are needed again to dispel the market's doubts. Passing amendments to the Commercial Act to improve corporate management transparency and strengthen investor rights, as well as deciding not to touch the financial investment tax and major shareholder transfer tax as most investors wish, are only necessary conditions for creating the right atmosphere. This alone is not enough to trigger change, given the significant differences between real estate and stock market funds and the higher-than-expected distrust in the Korean stock market. It also cannot overcome the "belief" in real estate investment as a means of asset growth, inheritance, and a measure of economic status.

Those who are critical of the Lee Jaemyung administration are already discussing the possibility of a "Moon Jae-in administration Season 2." If the administration misses the right timing, only increased household debt and worsened inequality indicators will remain, providing easy targets for critics. Their patience will not last long, and when it runs out, the Lee Jaemyung administration's policies will inevitably come under siege.