[Feature] Fear of missing out: Psychology behind Kospi rally

The growing interest in the stock markets reflects a major industrial shift from manufacturing to finance.

“Fundamentally, as the focus has shifted globally from the manufacturing industry to a finance market, people want to grow their income with investments,” said Kim Yun-tae, a public policy professor at Korea University. “At the same time, people face more uncertainty over their future income due to early retirement and high unemployment rate -- which has resulted in stock and property market booms,” Kim added.

Millions of ants have bought more than 100 trillion won ($90.7 billion) of stocks locally and globally from the beginning of last year through Jan. 15 this year. According to data from the Korea Securities Depository and domestic brokerages on Sunday, retail investors purchased a net 102.2 trillion won in a year and 15 days -- 77.8 trillion won in the domestic markets and 24.4 trillion won from overseas.

Now, the Kospi has seen even more small investors jumping in since the new year began.

According to the Korea Financial Investment Association, a self-regulatory organization for the financial sector, the number of active stock accounts soared from 35.48 million to 36.17 million within the first 14 days of 2021. Retail investors’ deposits for stock investments reached a record 72.3 trillion won as of Jan. 11, the first time it crossed the 70 trillion-won mark since related data started to be compiled in 1998.


Smart ants

While many factors -- be it FOMO, abundant funds backed by low interest rates or a lack of other investment options -- drive investors, what may be different this time is that the ants are eager to outperform markets, with an increasing number of retail investors turning to do-it-yourself investing.

Retail investors withdrew from professionally managed funds. The total balance of actively managed funds decreased from 21.25 trillion won to 15.63 trillion won on Jan. 12, in movements experts see as an exodus to invest directly themselves. Meanwhile, ant investors bought a net 10.5 trillion won in the first 12 days of the new year -- 4.5 trillion won on Jan. 11 alone.

Contributing to this trend is readily available quality information, especially on YouTube.

Lee Jun-young, a 32-year-old Seoulite, begins his day by tuning into 90 minutes of YouTube starting at 7:30 a.m. to get ready for the stock market opening. He spends several more hours of the day learning about domestic and overseas markets and individual companies, doing his best to beat the market. Lee, who invests with most of his savings as well as loans, said his motivation for investment came after a sudden increase in the housing price -- up 5.34 percent on-year, the fastest in nine years, according to the Korea Real Estate Board on Jan. 5.

“Watching the housing prices going up like that, I felt like I was becoming poorer with my monthly salary, so I had to do something,” Lee said.

Lee, an ant investor, now feels so much more confident than the first time he prematurely bought stocks in a bio company a few years ago in the midst of a bio boom. The difference now and then for Lee is that he is more equipped with market knowledge, which he attributes to the YouTube channels he follows.

One of the YouTube channels that Lee subscribes to, Three Pros, hosted by three investment professionals. The show typically airs live for 90 minutes at 7:30 a.m., 6 p.m. and 11 p.m., for the US market. Every morning, more than 50,000 people tune in to the live show, and the channel recently reached 1 million subscribers -- a whopping tenfold growth from January 2020.

“The current market boom is also attributed to platforms like YouTube, which contributed to getting rid of information asymmetry,” Yeom of E-Best said.