"Extreme Stock Price Volatility in Korea Damaging National Brand"

▲ Introduction page of Ruchir Sharma, Chair of Rockefeller International

A senior executive at a major U.S. asset management firm has claimed that South Korea's brand value is being undermined by its extreme stock price volatility.

Ruchir Sharma, Chair of Rockefeller International, the global division of Rockefeller Capital Management (RCM), expressed this view on the 21st (local time) in a Financial Times opinion piece titled "Why the World's Hottest Stock Market Became a National Burden."

Sharma analyzed the situation in which South Korea faces national burdens due to the wild swings in its stock prices, citing several factors.

He pointed out, "The South Korean market has experienced unusually severe fluctuations for decades, largely driven by the high proportion of retail investors in daily trading," adding, "Now, the booms and busts of a market led by artificial intelligence (AI) companies are further amplifying this volatility."

Sharma noted that volatility in South Korea over the past 12 months has been more severe on only four occasions since record-keeping began in the 1980s, and that those instances occurred in emerging economies hit by financial crises: Nigeria, Turkey, Brazil, and Greece.

He followed up with an assessment that, were it not for this volatility, the South Korean market would be an investment destination to make massive returns by investing in blue-chip companies.

In addition to extreme price swings, he explained that the cyclical nature of key industries like semiconductors and the weak corporate governance of chaebol conglomerates are also factors driving away long-term investors.

Sharma argued that to prevent this "Korea discount," the government should make policy efforts focused on offering solutions rather than creating potential sources of problem.

He also raised criticism that the government had fueled speculation in the process of pushing for market-boosting reforms.

Mentioning subsequent government measures to curb speculation, Sharma diagnosed, "Stock speculation has been pointed to as being linked to a deep-rooted and persistent social gambling culture."

He argued, "A trading culture that chases overnight riches drains capital away from more productive investments, including many of South Korea's solid companies."

Sharma concluded his piece by stating, "What happens in the world's sixth-largest market resonates far beyond its borders. With the KOSPI—where about 75 percent of corporate profits are generated overseas—long serving as an early indicator of global bull and bear markets, South Korea's brand is being damaged by the erratic behavior of a market that increasingly seems to be losing control."

(Photo: Captured from Ruchir Sharma's website, Yonhap News)

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