Live Ammo Could Turn into Bomb... 'Between Investment and Speculation' [Asset Bubble Warning]

Individual Investors Net Buy 4.5 Trillion Won on KOSPI on the 11th
Stock Price Volatility Highest Since June Last Year
2,241 Trillion Won Rush into Real Estate
Experts Warn "Asset Market Overheating"

[Asia Economy Reporters Eunbyeol Kim and Minwoo Lee] The domestic asset market, including stocks and real estate, is wavering between ‘investment and speculation.’ The money injected to respond to the COVID-19 pandemic, which was disconnected from the real economy, first stimulated the real estate market and recently poured into the stock market, continuously driving asset prices upward. Various risk indicators are already sending warning messages, but with liquidity that never dries up, the market is embracing a ‘bubble bomb’ that could burst at any time.

According to the Korea Exchange on the 12th, individual investors net purchased 4.4921 trillion won in the KOSPI market the previous day. This is the largest daily amount ever, more than double the previous record (2.2206 trillion won on November 30, 2020). Since the beginning of this year until the previous day, individuals have bought stocks worth 6.238 trillion won.

Amid abundant liquidity, real estate regulations have made loans difficult, and soaring house prices have pushed the dream of owning a home further away for young people, who have flocked to stock investment. Despite institutions selling stocks to realize profits the previous day, individuals bought stocks, competing against institutions. The index is still holding up. The KOSPI easily surpassed the 3,200 mark the previous day, and although it experienced some early session correction on the day, the decline was limited to around 0.6% (as of 10:49 a.m.).

However, stock price volatility is increasing. The KOSPI fluctuated by 170 points in a single day the previous day, showing a rollercoaster market. The KOSPI Volatility Index (VKOSPI), known as the ‘fear index,’ rose to 35.65 the previous day, the highest level since June 18 last year (37.30). The VKOSPI, which surged to 69.24 on March 19 last year during the early spread of COVID-19, had steadily stabilized but has recently risen again. ▷Related articles on pages 3 and 4

Real estate fund inflows have also intensified. According to the Bank of Korea’s Financial Stability Report, as of the end of September last year, real estate finance exposure reached 2,214.9 trillion won, a 10.5% increase compared to the same period the previous year. Household loans amounted to 1,133.7 trillion won, up 8.0% year-on-year, and corporate loans reached 816.4 trillion won, increasing 10.8% over the same period.

Regarding the overheating of the asset market, Asia Economy conducted an urgent diagnosis with experts, who agreed that although the asset market bubble may not burst immediately, it is clear that a bubble has formed, and they advised caution. Professor Youngik Kim of Sogang University Graduate School of Economics said about the stock price adjustment, “Compared to various economic indicators such as nominal GDP and import-export trends, the speed of the KOSPI’s rise is excessively steep,” and predicted, “A correction may continue for a considerable period, and during this process, the KOSPI could fall below 3,000.”

This content was produced with the assistance of AI translation services.