Editorial: Market Cap Evaporates 3,270 Trillion Won: Politicization Disaster
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Editorial: Market Cap Evaporates 3,270 Trillion Won: Politicization Disaster Government and Ruling Party Criticized for Using Stock Market as Election Tool Amid Bubble Burst
Yesterday, the KOSPI plummeted over 8% within three minutes of opening, triggering a circuit breaker that halted trading. During trading, it fell to the 4,900 level, breaking below the 5,000 mark for the first time in nine months. The trigger was the “Blue Tsunami,” where the Democratic Party secured a landslide victory in the U.S. midterm elections. Semiconductor stocks plummeted en masse due to concerns that the U.S. Democratic Party would regulate data center construction.
The issue is that the stock price plunge is not a temporary phenomenon but has been recurring throughout the second half of the year. The KOSPI, which hit a record high of 9,114.55 on June 22, plummeted 44% to 5,059.69 in about four months. Over the same period, market capitalization decreased from 7,449 trillion Korean won to 4,173 trillion Korean won, a reduction of 3,276 trillion Korean won. Individual investors who bought at the peak suffered significant losses.
There is a stock market adage: “The higher the mountain, the deeper the valley.” The larger the bubble, the greater the decline. Many market experts analyze that policy failures inflated the stock bubble. In January, the National Pension Service suspended rebalancing until the end of June so that it would not have to sell domestic stocks even when their weight exceeded the permitted range, and in May it raised its target allocation for domestic stocks from 14.9% to 20.8%. By violating the basic principle of “buying low and selling high,” the National Pension Service failed to act as a safety net when the market crashed.
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