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Young Koreans: “There are only 2 ways to get rich: win a lottery or become a trader”

Jenny Lee has a dream: To own an apartment in Seoul, South Korea’s capital, where homes sell at around US$1 million each.

The 27-year-old woman was unemployed for a year until last month. She rented a room in a dormitory near Seoul. Her job will be laid off and she will earn that kind of money. She lacks a degree from a “good” university-this is the key to finding a coveted job in an economically dominant conglomerate such as Samsung Electronics, and she is a woman in a country where patriarchal norms are difficult to get rid of. At the same time, she thinks she has found a solution: day trading.

Source: Internet

“In Korea, us 20-somethings only have two ways to get rich: Either we win the lottery or trade shares,” said Lee, whose new job is at a hospital, perhaps the only big employer in these COVID-19 times. “We know we will never be rich on whatever wages we earn. We will never earn enough to buy a home.”

In many ways, Lee, who is currently betting on US technology stocks, is part of the surge in global retail transactions during the pandemic. This type of investment has quickly become popular in the United States because people who are bored or just unemployed stay at home during the lockdown and take advantage of commission-free and easy-to-swipe apps such as Robinhood and their stimulus funds.

Lee is one of the millions of South Korean individual investors and accounts for 65% of the value of benchmark Kospi transactions this year, up from 48% in 2019. According to Korea Investment Corporation & Securities, a brokerage company located in Seoul, most of these fledgling investors are in their 20s and 30s. Many of them have taken on debt: data from the Financial Supervisory Authority shows that between December and June this year, margin financing increased by 33%.

What makes these punters unique, however, is that they’re hoping stock gains give them a way out of an economy where opportunities were dimming even before COVID-19 struck. The chaebol-driven export-led model of growth was already suffering from the stalling of globalization before the pandemic. Now, jobs are even harder to find and mortgages tougher to get.

Many chaebols, like SK Group, are holding off hiring. Youth unemployment — for those between 15 and 29 years old — hit 10.1% in the second quarter, well above the 4.4% total. That may be lower than the almost 20% rate American youngsters currently face but South Korea is also a country where employees are hard to fire. Half of the record 682,000 people who gave up on looking for a job in August were in their 20s or 30s, Statistics Korea data show. Lee is currently studying for an exam that gets her an entree into the civil service. The pass rate of the exam is 40-to-one, while the salary is a mere US$1500 a month. Her starting wage, if she got into a chaebol, would be just around US$34,000 a year.

“Sociology” is a better indicator of what’s driving the stock market than economics, said Jeon Kyung-Dae, chief investment officer for equities at Macquarie Investment Management Korea. Low-interest rates make matters worse, he said, eroding the value of savings every day.

“Korean millennials are desperate, confronting a frozen job market,” said Lee Han Koo, an economics professor at the University of Suwon, adding that rising real-estate prices are magnifying this sense of frustration. “In this environment, stock trading becomes a once-in-a-lifetime opportunity” for riches.

Source: Bloomberg

The government, which is cautious about the real estate bubble, has taken measures to cool down speculation, such as limiting the loan-to-value ratio of houses under 900 million won to 40%. House prices in South Korea have been rising since 2014, and houses are becoming increasingly unaffordable. The median apartment price in Seoul is 918.1 million won ($792,800), while the country’s per capita gross national income is 32,047 US dollars, while the median apartment price in Seoul is 918.1 million won (half of South Korea’s residents and the majority of them) Location of the company). 180% of household debt disposal income in the country is now the highest among OECD countries.

Source: Bloomberg

South Korean individual investors are no strangers to speculation. They joined the global dot-com bubble and ensuing collapse in the late 1990s; latched onto exotic structured notes tied to stock and foreign currencies a decade ago; were enamoured of bitcoin in 2017 and lost money on illiquid hedge funds last year. This time, however, everyone’s trading.

“I’ve had friends who piled into biotech stocks because they liked the name of the company,” said Jang Ho-Yoon, a 26-year-old economics student who noted that all five of his family members are now trading stocks.

At some point, if history is a guide, regulators can try to contain some of the speculations. The Kospi is up about 6% this year, while the tech-heavy Kosdaq is up more than 25%, making it one of the world’s top-performing indices this year. But right now Koreans see stock trading as the fastest way to buy a home.

Source: Internet

“There used to be a few ladders for Koreans to climb to upgrade their social status — you study hard, graduate from a good college, get a decent job at a chaebol, and then finally, buy a Seoul home,” said Dong-Hyun Ahn, an economics professor at Seoul National University.

“Now even if you have a good degree and a conglomerate job, it’s impossible to buy a home.”

 

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