Long before he turned South Korea into the hottest stock market in the world, Lee Jae Myung was just a newbie, thirty-something day trader bleeding cash month after month.
All these decades later, Lee, now the nation’s president, is still miffed about those losses.
It’s not that he thinks he was any good at day trading. Too reckless, he says. No, what bothers him — according to interviews with over half a dozen people close to Lee, many of whom requested anonymity to discuss private conversations — is the gnawing sensation that those losses were amplified, again and again, by the unfair deals that controlling shareholders cut to enrich themselves at the expense of ordinary investors.
That lingering anger prompted him to impose sweeping financial reforms since he took power last June, including rules that level the playing field for all shareholders and strengthen boardroom accountability. Those measures in turn helped ignite the world’s biggest stock rally, one so torrid that it’s already overtaken his “Kospi 5,000” campaign slogan.
The aspirational index target aimed to show his determination to reshape Korea’s economic model and fix a market stuck with some of the lowest stock valuations among major countries. On Friday, the index closed at 5,809 points, leaving it up 38% this year and 115% since Lee took office.
“The speed of the rally has been so much faster than what we have expected,” said Oh Gi Hyoung, the Democratic Party lawmaker leading the Kospi 5000 special committee, tasked with lifting the market to erase the Korea discountBloomberg Terminal. The group has been recently renamed the K-capital market committee.
The pace of the ascent has given officials within the presidential Blue House newfound confidence: if they can achieve one goal this far, this fast, the others no longer feel out of reach. Lee’s office is now moving to press ahead with efforts to rein in the country’s overheated property market and root out market manipulation.
The rally has made Lee something of a folk hero to Korea’s 14 million day traders. The ants, as they’re known here, have celebrated the soaring Kospi so euphorically that it’s even buoyed Lee’s approval ratings, providing a sense of stability in a country still reeling from the constitutional crisis that toppled his predecessor a year ago. Sources close to Lee describe him as a pragmatist who views the stock market as the quickest way to jump-start the economy. There are early signs that’s happening, with both consumer confidence and spending ticking higher as the Kospi surges.
What’s more, the bull market is forcing Koreans to reassess their obsession with real estate. For decades, it was seen by many here as the only way to create wealth, accounting for nearly three quarters of household assets. The “over-concentration of property ownership over financial assets is about to reverse,” said Peter S. Kim, global investment strategist at KB Securities Co. This, he said, is “one of the most profound trends from Korea in the coming decade.”
To be clear, analysts only give Lee some of the credit for the Kospi rally. The global AI boom, they note, has powered many Korean tech stocks including Samsung Electronics Co. and SK Hynix Inc. higher over the past year. Lee’s “reforms are important and they definitely help valuations, but to say that Kospi is up to 5,000 because of government policies only is probably overstating the impact,” said Mixo Das, head of Korea equity strategy at JPMorgan Chase & Co.
Many economists say they need to see more evidence the stock gains are truly boosting growth. Without that spillover into the real economy, even some within Lee’s own party worry that his stock-market obsession could eventually backfire. He must show he’s boosting prosperity for all Koreans — not just the rich — by tackling inequality in a country where households have been stuck with one of the world’s highest debt burdens, they say. Lee himself has called this debt problem — the result in large part of soaring apartment prices — a “ticking bomb.” At the same time, decades of export-led growth have left the economy highly sensitive to global demand shocks, making it all the more important for equity gains to translate into a wealth effect.
During a cabinet meeting last month, Lee said that Korea’s long-undervalued capital market is “reemerging as a solid foundation for the growth of future innovative industries and for the healthy accumulation of national wealth.” The president’s office said in a statement to Bloomberg News that it’s working to strengthen trust in the stock market by curbing manipulation and promoting long-term investing.
Fixing The System
In many ways, Lee’s beginnings were steeped in challenges. Early in life, Lee started stock trading as a side hustle as he realized his eventual career in public service would only offer modest pay, according to one close aide. It didn’t go well — at first. “I became a day trader, trading all day long….Looking back now, it was completely reckless,” he would recall later in an interview on 3Pro TV’s YouTube channel, a popular venue among retail investors. “I lost everything. I was completely wiped out.”
His first career as a human rights lawyer ended in disillusionment when he realized how little difference his social activism made. In 2005, he joined the Uri Party, the predecessor to the Democratic Party, and soon made a run for mayor of Seongnam, a tech hub southeast of Seoul, but lost. He won on his second attempt four years later, launching a steady ascent through his party.
As a retail trader, Lee understood that powerful conglomerates routinely saddled minority shareholders with losses through transactions favoring controlling families. A commercial code that bound board members to the interests of major shareholders rather than all only deepened the imbalance. Investors have cited various transactions as reasons for caution, including the 2015 merger of two Samsung affiliates despite warnings from Elliott Management Corp. that the low purchase price would hurt shareholders.
Fixing the system became a top priority for Lee, but he wouldn’t get around to it until 2022, when he first ran for president as the Democratic Party’s nominee. He lost to Yoon Suk Yeol by the narrowest margin in Korea’s history as voters vented frustration over his Democratic Party predecessor’s inability to fix unaffordable housing and economic inequality. The campaign was also overshadowed by scandals tied to a Seongnam development project from his time as mayor, and Lee was later found guilty of violating the law by making false statements about allegations raised against him. (The country’s top court overturned the acquittal that enabled Lee’s presidency, but the case remains pending and is unlikely to proceed until his term ends.)
It was during this election that Lee floated his Kospi 5000 slogan. “I don’t think Kospi 5000 is that difficult,” he said on 3Pro TV’s YouTube channel. “If you believe in me, you should take a greater interest in the stock market.”
Lee became president after the country was plunged into a political crisis following Yoon’s martial law gamble, relying on the Kospi 5000 pledge to reassure voters. He campaigned on reforms to target long-overlooked corporate governance problems, including mandatory cancellation of treasury shares used by founding families to keep control.
Investors initially dismissed the campaign, noting that past reforms “never succeeded regardless of which party took over,” according to Namuh Rhee, chair at Korean Corporate Governance Forum. But within a month of his inauguration, Lee pushed through a revision to expand the role of fiduciary duties to boost board accountability. He would go on to overhaul dividend taxes to encourage payouts, expandBloomberg Terminal enforcement resources to root out market wrongdoing and unveil a roadmap toward developed-market status by MSCI Inc. — major steps investors say are key to ending the Korea discount and lifting growth.
“Every promise made by previous administrations have disappointed. But this time was different,” Rhee added.
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Even with Lee’s overture to lure ants, weak minority‑shareholder protections and sluggish growth sidelined many retail investors during the rally, pushing capital offshore and driving record investment into US stocks that in turn weakened the won. Reversing those flows would be a meaningful boost for the market. “Lee probably believed that if we do not do anything about the deep distrust in the capital market, we might end up seeing all citizens investing in US stocks in the end,” said Park Hong Bae, a Democratic Party lawmaker.
To underscore his commitment, Lee purchased ETFs worth 40 million won ($27,600) in the domestic stock market just days ahead of the June election and vowed to invest 1 million won every month for the next five years if elected. As of September, the investments have translated into a 26.4% return. Last year, the head of the financial watchdog also sold an apartment in Seoul’s affluent Gangnam area and bought exchange-traded funds.
These days, almost any signal from Lee can set markets buzzing. A speech backing the defense sector spurs memes of Lee in military uniform on online forums and related stocks surging. A proposal to include hair-loss treatment under public health insurance propels hair-growth stocks. His approval ratings climbed to 63% in mid-February, the highest level in more than three months, according to Gallup Korea.
Even with the momentum, there’s more work to be done. Korea’s economy shrank in the fourth quarter, underscoring just how hard it will be for Lee’s administration to turn things around. The housing market remains overheated, with regional disparities despite repeated efforts by officials to curb speculation. Still, a recent report from KB Financial Group notes that allocation priorities between domestic real estate and equities among high-net-worth individuals have converged, a rare signal of rising market interest.
In early February, Lee delivered an unusually stark warning to homeowners, saying that he was giving them a “last chance” to sell their excess homes before the government raises real estate taxes and vowed to rein in property prices “at all costs.” His administration last month announced plans to fast track the building of new homes as part of supply-side reforms. His next priorities include canceling treasury shares, rooting out illegal activities like insider trading and delisting of unprofitable Zombie firmsBloomberg Terminal.
Lee loves to preface his public remarks by reminding everyone he used to be a “big ant.” And one day, when his political career has finally come to an end, he will settle down and dedicate his time to trading stocks again.
Read more on Bloomberg Business
