[Initial Perspective] COVID-19 and Ants

[Asia Economy Reporter Song Hwajeong] It has been over a year since the outbreak of COVID-19. Over the past year, there have been many changes across society, and the stock market is no exception. After experiencing a sharp crash in the early days of the COVID-19 spread, the stock market quickly recovered from the downturn and continued its upward trend. The KOSPI reached the 3,000-point mark for the first time in history, and the KOSDAQ also surpassed the 1,000-point level for the first time in 20 years.

The most significant change in the stock market after COVID-19 has been the rise of individual investors. In the past, individuals often engaged in short-term trading or followed theme stocks, frequently incurring losses, and were seen as the weaker players in the market, overshadowed by institutions and foreigners. However, this image completely changed with COVID-19. During the market crash caused by the pandemic, individual investors massively purchased large-cap blue-chip stocks, helping to defend the index from falling further. The KOSPI, which had fluctuated around the low 2,000s a year ago, plummeted rapidly as COVID-19 spread, dropping to the 1,400 range in less than a month. It was a panic market where the bottom was unpredictable, but the KOSPI recovered to 1,900 within a month. During that month, foreigners sold 7 trillion won, and institutions only bought about 470 billion won. In contrast, individuals bought approximately 5.9 trillion won, pulling the index out of the slump.

As individuals stepped up to defend the index against foreign selling, the term ‘Donghak Ant Movement’ emerged. This term is a reference to the Donghak Peasant Movement, which historically fought against foreign forces. Thus, the Donghak Ants were born and proudly took center stage in the 2020 stock market.

With the continuous buying by individuals, the KOSPI maintained a streak of record highs toward the end of last year and surpassed the 3,000-point mark for the first time at the beginning of this year. It further climbed to the 3,200 level on the 25th of last month. The KOSDAQ also reached the 1,000-point level for the first time in 20 years.

The soaring real estate prices and regulations amid historically low interest rates accelerated the money move into the stock market. The belief that stocks were the only way to save money spread, attracting individual investors to the market. Investor deposit funds, which represent cash waiting to be invested in the stock market, were only 30 trillion won at the beginning of last year but more than doubled to exceed 65 trillion won by year-end, reaching a record high of 74 trillion won last month. As more people borrowed money to invest in stocks, ‘debt investment’ (debt-fueled stock investment) also hit record highs daily. The balance of margin loans, which is the amount individuals borrow from securities firms to invest in stocks, recently surpassed 22 trillion won for the first time. The margin loan balance was around 9 trillion won at the end of 2019, exceeded 19 trillion won by the end of last year, broke through 20 trillion won this year, and has now risen to the 22 trillion won range. Due to the individual investment boom, securities firms posted record profits during the COVID-19 period. The 57 domestic securities firms earned nearly 1 trillion won in interest from individual margin loans last year alone. Kiwoom Securities, widely used by individual investors, saw 3.33 million new accounts opened last year, a 389.6% increase compared to 680,000 in 2019.

With the start of domestic COVID-19 vaccinations this month, expectations for the end of the pandemic are growing. Even if COVID-19 ends, a complete return to the pre-pandemic state is unlikely. The accelerated money move triggered by COVID-19 will likely continue as well. Just as people used to save by setting aside a portion of their monthly salary, now they are buying stocks with a portion of their income. As individual stock investment becomes increasingly common, education for proper investment habits is essential. Efforts to provide accurate investment guidelines are urgently needed to prevent individuals from being misled by incorrect investment information flooding platforms like YouTube.

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