As South Korean stock markets continue to struggle in the month of October, South Korean Government is taking various measures such as holding a debate at The National Assembly about current status of South Korean stock markets. As some at the debate claimed that the low point of KOSPI would be around 1,900 points, some suggested that it is time for households to enter stock markets rather than real estate market. They are attempting to induce capital market of households such as floating funds that have gathered around real estate through reduction of stock exchange tax. Some are criticizing the fact that South Korean Government is only busy with taking temporary measures to support stock price without having fundamental measures towards concerns about additional drop of stock prices and distrust towards stock industry.
“For South Korean stock markets to be valued at fair price, we need an increased participation of households in stock markets.” said Director Kim Hak-kyoon of Shinyoung Securities’ Research Center at a political debate ‘Measures for Collapsing South Korean Stock Markets’ that was held at National Assembly Library of Korea on the 31st. He stated that South Korean Government must find and improve reasons why South Korean stock markets are undervalued to end this bad cycle.
Director Kim is estimating that KOSPI will hit low point around 1,900 points. “Institutional investments in South Korea are too weak and general population is avoiding stock markets as it has almost no success in stocks unlike real estate.” said Director Kim. “While most of South Korean households have their assets and real estate, there needs to be policies that will direct these assets when real estate is not an option.”
There were also opinions about reducing steps of stock exchange tax to invigorate stock trades.
“Since stock exchange tax was introduced to suppress speculation demands, there is a need to look into termination or reduction of steps for stock exchange tax.” said Hwang Sae-woon who is a researcher for Korea Capital Market Institute.
“To invigorate capital market, we need to actively consider giving tax benefits for office workers who invest less than certain amount and those who hold stocks for long period of time.” said Kim Byung-wook who is a member of The Minjoo Party of Korea and held this debate.
However, representatives from financial investment industry who were at this debate pointed out that while the fact that households are not investing much into stocks is true, simply moving funds that are tied to real estate to stock markets is not the solution to this problem.
“If stock markets are booming and real estate industry is failing, are we going to lower expected return from stocks and support real estate instead?” said Director Choi Seok-won of SK Securities. “We need to consider whether we are solving problems through systems even when decision-making is reasonable.”
Staff Reporter Ryu, Geunil | ryuryu@etnews.com