South Korea seeks to unlock property money in ‘Kospi 5,000’ drive

SOUTH Korea is seeking to redirect household wealth concentrated in real estate into equities, according to a lawmaker spearheading a committee tasked with supercharging the nation’s stock market.

“Reviving the stock market is one of the president’s key political goals,” Oh Gi-hyoung, chairperson of the special committee on “Kospi 5,000”, said in a Bloomberg News interview this week. “He hopes to see capital shift from the property market into equities.”

The ruling Democratic Party lawmaker’s comments underscore the extent to which President Lee Jae-myung is pushing for higher equity valuations. While optimism over corporate governance reforms has already made the Kospi one of the world’s best-performing benchmark indices this year, the new administration’s view is that the rally could extend if capital can be more effectively reallocated. 

South Koreans’ long-held penchant for property has fuelled a rise in home prices and turned real estate into a magnet for speculators. A 2024 Bank of Korea survey showed only a quarter of household assets were in financial investments, while 75 per cent were tied up in real assets – mostly real estate – an exceptional level of concentration by global standards. 

Retail investors – roughly 14 million out of the nation’s 52 million population – have gained political clout as their ranks swelled during the pandemic-era investment boom. Former president Yoon Suk-yeol also promoted stock-friendly initiatives during his term. 

The ad hoc Kospi 5,000 committee was formed last month, with its name suggesting an index target that is 55 per cent above Tuesday’s (Jul 15) close. The slogan has sparked both optimism and skepticism about the feasibility of reaching that goal. 

Oh said 5,000 is not a numeric target, but more of a symbolic phrase to emphasise policy commitment. 

“The index has been suppressed for too long, and the goal is to bring it back to a healthy level – not to hit that number by a specific date. And we’re not excluding Kosdaq from the picture.” 

He also dismissed concerns over a potential bubble in stocks, saying the market is currently at a “normalisation stage”.

The Kospi has gained about 33 per cent so far this year to near a record high. The gauge is trading at 10.7 times 12-month forward earnings estimates, compared with a ratio of 15 for Japan’s Topix. 

A key driver for the upswing was the passage of the commercial code revision, aimed at improving corporate governance and helping protect the rights of minority shareholders, after Lee’s election win in June.

“Organisations like the Federation of Korean Industries wouldn’t have seen the Commercial Act passing,” Oh said, referring to the body representing the country’s conglomerates. “They were caught off guard and now scrambling to respond.” BLOOMBERG