[Opinion] South Korea's Capital Market and Self-Imposed Hurdles

Choi Gukhyun, Professor at the College of Business Administration, Chung-Ang University

As the new year begins, already a month and a half has passed. The weather has been repeatedly cold and then warming up, which can be mistaken as a herald hastening early spring. This year, with nationally important presidential and local government elections following one another, the news in the media is flooded with election-related events. Electing the country's stewards well will allow the sovereign people to rest easy and live peacefully. Politics and the economy are inseparable wheels that organically influence each other and evolve together. Our country has become economically affluent and politically democratized. Economic freedom can promote political democratization, but countries with a successful history like ours are very rare in modern history. The Republic of Korea is exactly such a country.

The Korea Composite Stock Price Index (KOSPI) has been hovering around the 3000 mark. Compared to neighboring countries, the corporate value of our country is continuously undervalued. We list various risks as reasons for this undervaluation: political risk, security risk, economic risk, names of neighboring countries, and various risks prefixed by specific individuals and institutions. However, at some point, hearing these bizarrely named risks has become not unfamiliar but rather familiar. Using these risks as an excuse, we are essentially confining ourselves within a box. This means that the capital market, which should be efficient, is caught in a self-fulfilling pessimism.

This pessimistic self-fulfilling hurdle is inherent in politics, economy, and society, sometimes flaring up like a fire and burning everything around. However, within the scope of our awareness, it is at least possible to respond. The influence of each risk can be significantly limited by strategies and systems that address them. Politicians can limit political and security risks by performing their duties diligently as political experts. Economists can limit risks of specific companies by realizing ESG (Environmental, Social, and Governance) that maximizes the economic added value of scarce resources through fair competition. Members of society can limit social, regional, and occupational risks by performing their duties diligently as social, cultural, and professional experts who harmoniously practice the values and norms of society.

Adam Smith, who is credited with laying the foundation of modern political economy in the 18th century, argued in The Wealth of Nations that if the members of a country maximize their utility, the country can become prosperous. Likewise, if each member of our country faithfully performs their duties as experts in their respective roles, we believe that a prosperous Republic of Korea can be created. It is with this hope that the undervalued capital market of our country will break out of its box and continue to grow.

[Choi Guk-hyun, Professor, College of Business Administration, Chung-Ang University]

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