[Inside Chodong] Positive Effects Brought by the Bull Market

Concerns Over National Pension Fund Depletion Greatly Reduced

Household Assets Shift from Real Estate to Finance

Need to Prepare for Potential Market Corrections Ahead

Changhwan Lee, Deputy General Manager of the Securities Capital Markets Department

As the Korean stock market has broken through its all-time high, a number of positive effects are emerging throughout society. Most notably, the increase in the National Pension Fund's investment returns has provided reassurance regarding the public’s retirement security. Thanks to the KOSPI’s upward trend, it is reported that the National Pension Fund’s return for this year is approaching 20%. Even though less than five months have passed in 2026, the fund has already surpassed last year's record-high return of 18.8%. With investment returns rising significantly both last year and this year, some analysts suggest that the projected depletion date for the National Pension Fund has been delayed by several decades from its original estimate around 2064. The stock market rally has effectively dispelled, for a considerable period, the national anxiety over pension depletion, making a decisive contribution to the retirement stability of all citizens. This is the most significant butterfly effect brought about by the ongoing bull market.

This achievement is particularly meaningful because it could not have been realized under the previous real estate-centric economic structure. The stock market boom has given younger generations the experience that wealth can be accumulated through financial assets, not just real estate. In advanced economies such as the United States and Japan, more than 60% of household assets are composed of financial assets, whereas in Korea, over 60% are tied up in real estate. There are expectations that, through this opportunity, Korea will take its first steps away from a real estate-heavy and distorted asset structure toward a more advanced, financial asset-oriented market.

The warmth of the capital market is also spreading to the real economy. As the stock market rises and household wealth increases, the “Wealth Effect” is becoming visible, with noticeable improvements in the performance of department stores and some retail companies. More people are spending their stock market gains at department stores, clothing shops, and convenience stores, making purchases beyond their usual consumption patterns. The stock market boom has also led to a sharp increase in related tax revenues. In the first quarter of this year, securities transaction tax revenue reached 2.8 trillion won, a 234.6% increase compared to the same period last year. As the stock market improves, it is benefiting not only household finances but also the nation’s fiscal health.

Of course, not all the effects are positive. Above all, there is concern that the recent KOSPI rally is concentrated mainly in a few large-cap stocks such as semiconductor companies. If the semiconductor industry’s upturn falters, a KOSPI correction will be difficult to avoid. Financial instability issues are also surfacing, as there has been a sharp increase in so-called “debt-fueled investing,” where people borrow money in hopes of hitting it big. Excessive leverage is a shortcut to insolvency or bankruptcy. Stock market experts commonly recommend reducing leverage, as a market correction could lead to irreversible consequences. There is also concern that the growing asset polarization between those who profit from stocks and those who do not may fuel social conflict.

The KOSPI has broken nearly 20 years of stagnation and is now in its second year as the world’s leading bull market. In order to sustain this success, continuous innovation by companies is essential, but so is consistent policy support from the government and political sphere. It is important to refine efforts to prevent unfair trading—such as prohibiting dual listings, eliminating zombie companies, and stopping market price manipulation. Since stock prices do not always rise, it is also vital to prepare for future corrections. When interest rates rise excessively, the stock market typically undergoes a correction, and there are increasing signs that bond yields are on the rise. It may be necessary to consider safeguards to ensure a soft landing for the stock market when the bull market party ends and corrections arrive.

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