Global shockwaves as South Korea's crash rattles markets
www.abc.net.au
Balance is a fundamental principle of everyday life on the Korean peninsula, but the worst stock market crash in the nation's history threatens the livelihood of millions.
  • Optional@lemmy.world
    5·
    12 days ago

    It began with a constitutional crisis and an attempted coup.

    To divert attention in the aftermath of last year’s political upheaval, new President Lee Jae Myung encouraged citizens to invest in the local stock market in a series of fiery nationalistic speeches about South Korea’s global standing.

    It was time, he said, for the “Korea Discount” to be erased and replaced,perhaps, by a “Korea Premium” and for the nation to rely less on property speculation.

    “The Republic of Korea as a market remains undervalued,” he said.

    “I will create an objective environment to make Korea the world’s best investment destination.”

    As part of the program, rules around using debt to invest were loosened and debt-infused investment products — known as single stock leveraged Exchange Traded Funds — spurred South Koreans to plunge everything, and more, into the market.

    The timing was both impeccable and tragic.

    Chip makers were in hot demand as the big American tech firms, having spent trillions of dollars in the race for AI dominance, began the next phase of the boom: rolling out AI to the world.

    An obscure American chip maker, Nvidia, had already shot to prominence when it was discovered that its gaming chips were ideal for developing AI platforms, and it suddenly took the mantle of the world’s most valuable corporation.

    But when Silicon Valley’s tech giants — Amazon, Microsoft, Meta, Alphabet, Oracle, Apple and Tesla — began a rush to build data centres, they created an extreme shortage of ordinary memory chips, the kind used in mobile phones and laptops.

    A mere handful of companies dominate this area. One is Samsung Electronics, and another is SK Hynix.

    Both are South Korean giants and, three years ago, made up about a quarter of the Korean stock market.

    By last month, as their earnings soared on an acute global chip shortage and their stock prices multiplied, they comprised 60 per cent of the Kospi’s total value.

    As late as April, regulators, in an ill-fated move, approved further new trading methods to allow investors greater use of debt when investing in individual stocks.

    On Wednesday, South Korea’s Finance Minister Koo Yun-cheol was forced to apologise after several politicians accused the government of turning the stock exchange into a casino.

    Americans: Oohhh yeah. That.