[Insight & Opinion] Is Our Stock Market on the Right Track?

Record-High Volatility and Soaring Market

Excessive Reliance on Semiconductors and Government Intervention

Urgent Need to Foster a Developed-Market Corporate Environment

Introduction of a Differentiated Voting Rights System Needed Pro

Looking back at the trajectory of the KOSPI index over the past year, volatility has reached an all-time high. On the 11th, the index broke through the 7,800 mark and hit a peak of 7,876, which is approximately 3.44 times higher than the lowest point of 2,284 recorded in April last year. Compared to the 2.2-fold increase seen during the 2008 financial crisis and the 1.5-fold increase during the COVID-19 era in 2020, such volatility can be interpreted more as a 'crisis' than a positive sign.

During the 2008 financial crisis, the market collapsed due to 'panic selling' driven by fears of a financial system breakdown. After 2009, central banks around the world responded simultaneously to the global economic crisis and managed to recover a significant portion within a year. In contrast, during the COVID-19 period in 2020, the decline was as steep as in 2008, but the market rebounded quickly and soared. Although the index plummeted 35% from 2,200 to 1,400, it bounced back rapidly and surpassed the 3,300 mark within a year. This artificially bullish market was created by unlimited global quantitative easing, full-scale policy mobilization by each country, and the emergence of beneficiary industries such as semiconductors and IT.

Today's bull market is not only notable for its scale but also distinguishes itself with continuously rising volatility. The market environment also differs, with both upward and downward factors coexisting, rather than a single shock. Upward drivers include expectations of U.S. interest rate cuts, improvements in the semiconductor sector, increased demand for artificial intelligence (AI), and large-scale net purchases by foreign investors. Meanwhile, downward pressures such as delays in U.S. rate cuts, an economic slowdown in China, a sharp rise in exchange rates, concerns over a semiconductor sector peak, as well as the wars in the Middle East and between Russia and Ukraine, are also exerting influence.

Among these factors, it is somewhat concerning that the current market relies not on performance but on government intervention. The current administration's policies are grounded in the intention to resolve the 'Korea discount' and the judgment that it is better for individuals' assets to move from real estate to the capital market. While there are varying degrees, the government's direct interventions—such as short selling bans, tax support measures, and financial market stabilization—are not overly aggressive. However, indirect interventions—such as re-evaluations of companies with low price-to-book ratios (PBR), and the operation of public funds to defend the downside and amplify the upside—are more pronounced. With foreigners and policy leading the market, its autonomy appears diminished. The heavy dependence on the semiconductor sector is also frequently pointed out.

Is this really the right direction? Even in the advanced U.S. stock market, government policy inevitably has an impact. However, the difference is that the environment and system are fundamentally established so that companies lead and grow the market based on their performance. In the U.S., innovative companies in energy, transportation, distribution, biotech, IT, and AI have continued to emerge across different eras. It is rare for the government to overtly implement policies solely to boost the index.

The top priority of the stock market is not for participants to make profits through 'money games,' but to enable companies to raise funds to expand their businesses and grow. In this context, Korean companies should be able to secure capital through listing while retaining a sufficient level of shareholding to defend their management rights. Government intervention should be aligned with institutional support, such as the introduction of 'differentiated voting rights.' It is also worth noting that the reason the American middle class holds many stocks is not because the government induced personal assets into the stock market, but because companies distributed stocks or options as compensation for performance. Ultimately, the true path to developing the stock market lies in enabling companies to work enthusiastically and distribute capital autonomously.

Kim Hongjin, CEO of Work Innovation Lab

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