Korea's biggest crisis was not a collapse, but a collapse of market confidence

ON AUGUST 4TH, KOREAN STOCK MARKETS FACED A CRISIS OF CONFIDENCE DUE TO VIOLENT FLUCTUATIONS AND POLICY FAILURES: KOSPI DROPPED BY 40 PER CENT OVER 27 TRADING DAYS, BY MORE THAN 5 PER CENT TO 33 TRADING DAYS, AND BY FAR MORE THAN CONSTANT. LEVERAGE ETF PRODUCTS DRIVE MECHANICAL SILOS, AND SK HERCULES STOCK PRICES CHANGE BY 40 PER CENT, INCREASING MARKET RISK. THE DAMAGE WAS SEVERE, WITH 360,000 ACCOUNTS BEING FORCED TO FLATTEN AND 62 PER CENT BEING UNDER 35 YEARS OF AGE; THE PROBLEM WAS EXACERBATED BY THE FAILURE OF PENSION COUNTERCYCLICAL OPERATIONS. WHILE AI INDUSTRY ADVANTAGES EXIST, INSTITUTIONAL RISKS, SUCH AS AN UNSTABLE ENVIRONMENT, ARE LESS ATTRACTIVE AND THE GOVERNMENT NEEDS TO RE-ESTABLISH MECHANISMS TO RESTORE TRUST. KEY POINTS: 1. KOREA ' S LEVERAGE ETF DESIGN AMPLIFIES VOLATILITY, MAKES A HIGH 40 PER CENT OF TRANSACTIONS WHEN STOCK PRICES CHANGE, AND REDUCES RISK-ADJUSTED RETURNS TO DRIVE FOREIGN INVESTMENT AWAY. 2. THE POLICY ENCOURAGES THE PARTICIPATION OF THE DIASPORA BUT THE RISK MANAGEMENT IS INADEQUATE, LEADING TO A LEVELLING OF 62 PER CENT OF THE 360,000 ACCOUNTS AMONG YOUNG PEOPLE, WHICH DEEPLY UNDERMINES THE TRUST BASE. 3. DEMAND FROM THE AI INDUSTRY COULD NOT MASK THE SHORTCOMINGS OF THE KOREAN MARKET SYSTEM, AND INVESTORS WERE CONCERNED THAT A STABLE AND EQUITABLE ENVIRONMENT REQUIRED THE GOVERNMENT TO RESTORE CONFIDENCE BY RESTORING CREDIT。