A screen in Hana Bank’s trading room in central Seoul shows the Kospi closing at 2,293.7 points on April 9, down 40.53 points, or 1.74 percent, from the previous trading session. [YONHAP]

 
“I never invest in the Kospi,” said an office worker in his 20s very concisely and bluntly, contending that it doesn’t seem profitable.
 
Another office worker in his 30s, Heo In-sung, also said he is “gradually building a portfolio of U.S. stocks,” while stopping investments in Korean companies like Samsung Electronics and Kakao.




Young Korean investors flee local markets
Young investors in Korea are largely ditching local stock markets, turning instead to foreign markets and cryptocurrencies.
 
The proportion of investors in their 20s and 30s in the domestic market has steadily declined — from 14.9 percent and 20.9 percent in 2021, respectively, to 11 percent and 19.4 percent in 2023, according to data from the Korea Securities Depository.
 
Last year, local investments by the two age groups fell to an all-time low of 9.8 percent and 18.8 percent.
 
Ownership levels reflect a similar downturn. In 2020, people in their 30s held 9.9 percent of listed stocks in the Korean market, but that slid to 7 percent last year. For those in their 20s, the decline was from 2.2 percent to 1.6 percent over the same period.
 
Even investors in their 40s are pulling back, the age level that represented the largest demographic in the Korean investor market. The proportion made up 23 percent in 2021, but fell to 22.1 percent in 2024. Those aged 50 and older now own a staggering 70.9 percent of all domestic stocks.
 
While this reflects Korea’s broader aging trend, market experts warn it could signal diminishing vitality in the nation’s stock markets.
 
“If the younger generation continues pulling back, trading activity could shrink, reducing market liquidity,” said Hwang Se-yoon, a senior researcher at the Korea Capital Market Institute.




Aging market may threaten liquidity
 
The demographic shift has triggered concerns about a feedback loop of declining liquidity and weakening investor sentiment. Investors over the age of 50 tend to favor long-term, conservative investments, which often means lower trading volume.
 
Amid broader concerns such as economic slowdown, the Kospi and Kosdaq have already shown signs of falling liquidity. The average daily trading volume, which stayed at some 23 trillion won ($16.2 billion) in early 2024, dipped to around 18 trillion won at the end of the year, according to market tracker FnGuide. As of the end of March this year, the average volume stayed at 18.4 trillion won.
 
“A market that loses younger investors can’t be called healthy,” said Kim Sang-bong, an economics professor at Hansung University. “Efforts to boost corporate value must continue if we want to bring them back.”
 
The Bank of Korea (BOK) echoed this in a recent report, stating that companies must work to improve corporate governance and protect shareholders, especially in mergers, spinoffs and other structural changes that can affect investor trust.

U.S. President Donald Trump is reflected in the bullet proof glass as he finishes speaking at a campaign rally in Lititz, Pennsylvania, on Nov. 3, 2024. [AP/YONHAP]

Cryptocurrencies booming among youth


Roughly 47.8 percent of cryptocurrency investors in Korea were in their 20s and 30s as of last year, according to the Financial Services Commission, with their total trading volume on the country’s five major exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax — surpassing 2.52 quadrillion won, approximately 73.9 percent of the 34 quadrillion won traded by retail investors on the Kospi.
 
“It’s now common knowledge in the industry that cryptocurrencies like Bitcoin are siphoning off retail investment funds from the stock market,” said a brokerage industry insider.
 
Of around 700,000 overseas stakeholders of NH Investment & Securities, 56 percent were in their 30s and 40s. In contrast, only 13 percent of Kospi 200 investors were in their 30s, while 57 percent were 50 and older.
 
The volume of foreign stock transactions by Koreans nearly doubled in 2023 — from 59.3 billion shares in 2022 to 112.4 billion. That number surged again by 39 percent on year in 2024 to 156.4 billion shares, according to data from the Financial Supervisory Service (FSS) and nine securities firms obtained by Democratic Party Rep. Kim Hyun-jung.
 
The momentum has continued into this year. In the first quarter alone, despite a downturn in the U.S. stock market, net purchases by Korean investors reached a record $10.9 billion, the highest since it began compiling the related data in 2011.
 
In March, when the U.S. market started to plummet amid rising tensions over U.S. President Donald Trump’s tariffs, net purchases still totaled $3.87 billion — the third-highest monthly total on record.
 
The trend has even seen the coining of the now well-known term “eoljookmi” — co-opting a term referring to an unconditional attitude that expresses a willingness to invest in the U.S. market no matter what.




It’s all about returns
 
Young investors care about maximizing their returns — driving them to U.S. stocks and cryptocurrencies. While the Korean market has been stagnating since the end of the Covid-19 pandemic, the U.S. market was, until recently, on an upward trend. The Nasdaq Composite Index climbed 53 percent in 2023 and another 24.88 percent in 2024.
 
Real-world returns reflect this divide. Kakao Pay Securities reported that around 72 percent of investors who bought U.S. shares earned profits in 2023, compared to just 48 percent of investors who poured money into domestic stocks.
 
Bitcoin also posted a spectacular rally last year, surging 163.8 percent to surpass 150 million won per token, hitting an all-time high of $108,249 overseas. Altcoins like Ethereum rocketed 70.3 percent and Ripple soared 293.2 percent on the back of around-the-clock trading.
 
The lack of product diversity further deters younger investors. Although exchange-traded funds (ETFs) have expanded rapidly, the market is criticized for a proliferation of copycat products. For instance, after a quantum computing-themed ETF gained traction last year, similar ETFs quickly followed, prompting an investigation by the FSS.
 
Experts also point to structural issues in the Korean market, including weak shareholder return policies.
 
According to a report by the BOK, the country’s dividend payout ratio of 27.2 percent ranked last among 16 major economies. In comparison, Britain and Italy reported payout ratios of 137.4 percent and 116.4 percent, respectively.
 
Rather than reinvesting or distributing earnings, many Korean firms hoard cash. Data from the National Tax Service shows that retained earnings at domestic corporations hit an all-time high of 2.8 quadrillion won in 2023.
 
While many experts share Hansung University Prof. Kim’s belief that changes to corporate strategies are necessary to attract young Korean investors, others say the shift is more of a natural cycle than a crisis.
 
“Given how hot the U.S. and crypto markets have been, it’s no surprise that younger investors are flocking there,” said Roh Geun-chang, head of research at Hyundai Motor Securities. “If the Korean market rebounds, they’ll return just as quickly.”


Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY HWANG JEONG-IL [[email protected]]