[Asia Exclusive] "Strengthened Capital Market... Time to Focus on Market Innovation through Venture Capital Supply"

Interview with Shin Jin-young, President of the Korea Capital Market Institute

The capital market strengthens with the influx of younger generations
Efforts needed to attract pension assets and supply venture capital

Important to develop the domestic stock market into an advanced market
Individuals should be cautious of leveraged and all-in investments in virtual assets

Shin Jin-young, President of the Korea Capital Market Institute, emphasized that as the capital market has grown significantly due to the increase in stock investors, active efforts should be made to supply venture capital. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Minji Lee] Shin Jin-young, President of the Korea Capital Market Institute, who has observed the growth of the domestic securities industry for a long time, argued that now is the right time to focus on innovation in venture capital supply. President Shin explained, "During the COVID-19 pandemic, the size of our country's capital market grew larger, and securities firms were able to earn significant profits. Above all, the younger generation is becoming aware of and interested in the capital market early on, so I believe the scale of venture capital supply can be increased."

President Shin emphasized the need to establish a cycle where venture capital supply is made through a more solid capital market and the profits return to individuals. As the industrial structure is rapidly changing, the demand for venture capital supply in areas such as environment and IT is increasing, making the establishment of such a virtuous cycle even more urgent. To achieve this, it is crucial to pave the way for pension assets to enter the capital market. The introduction of the default option (pre-designated operation system) can be the first step. President Shin stressed, "The default option currently under discussion in the National Assembly must be passed to accelerate the supply of venture capital."

Efforts to grow the domestic stock market into an advanced market are also essential. President Shin stated, "Our country has a good geopolitical location and a large economic scale, and as Hong Kong's financial hub status weakens, we can emerge as an alternative," adding, "We will strive to improve systems so that the financial sector can play a role commensurate with our economic scale." Regarding recent calls from the government and political circles to re-pursue inclusion in the MSCI advanced market index, he explained, "Even if we are included in the advanced index, it is difficult for the index to suddenly rise significantly, but the stability of funds can be secured." He noted that since Korea is currently heavily weighted in the emerging market index, moving to the advanced index does not mean a sudden increase in foreign or institutional investment.

Above all, for such development, it is most important that the younger generation's stock investments move in a positive direction. With the domestic stock market rising only about 1% this year, investors who experienced last year's bull market are often found actively engaging in leverage and virtual asset investments to gain higher returns. President Shin strongly criticized this investment behavior, saying, "It is very risky for individuals to invest in places where the upside and downside are widely open." He added, "One might ask why not just avoid risks even without traffic lights, but individuals are up against institutions," and warned, "Since individuals mainly engage in trend-following trades, they are bound to suffer losses in the long term, so borrowing to invest with pension assets is absolutely forbidden."

He also advised that diversified investment through exchange-traded funds (ETFs) is desirable for virtual asset investments. Although institutions are gradually incorporating virtual assets, including through ETF launches, and there is increasing recognition of them as assets in the long term, considering volatility, it is risky to allocate a significant portion of the portfolio to them. President Shin analyzed, "Individuals should approach through diversification," and "It is desirable for institutions to enter, support the price stability of assets in the long term, and then expand individual investments."

After the COVID-19 pandemic, the KOSPI quickly grew to the 3,000 level but has recently been threatened even at the 2,900 level due to global inflation concerns. Domestic and international investment banks (IBs) predict that once inflation concerns subside significantly, the index could soar to as high as 3,500. However, President Shin said there are many factors to watch, so it cannot be viewed with unbridled optimism. He mentioned, "We need to observe during the winter how the previously disrupted supply issues are adjusted and whether they can reach a normal stage smoothly," adding, "If inflationary pressures increase further, the central bank's interest rate policy and how the market accepts it will also be important factors."

Asia Exclusive_ Shin Jin-young, President of the Korea Capital Market Institute. / Photo by Hyunmin Kim kimhyun81@

◆ Shin Jin-young, President of the Korea Capital Market Institute = Born in 1962, he graduated from Seoul National University with a degree in Economics. In 1990, he completed his doctoral studies in Finance at Carnegie Mellon University. In 1999, he served as an associate professor at Ajou University before moving to Yonsei University Business School as a professor in 2002. In February 2019, he became president of the Korean Securities Association, and in June 2019, he was appointed president of the Korea Corporate Governance Service. This September, he took office as president of the Korea Capital Market Institute.

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