It is no secret Korean stock markets have become like ATMs for cash-laden, unethical investors, local and foreign. Numerous small, individual investors, called the “corps of ants,” have fallen prey to these manipulative forces and gone bankrupt, with some committing suicide.
Yet few had expected President Park Geun-hye would point out this relatively peripheral issue at her first Cabinet meeting Monday, along with North Korea’s threats on national security. One might guess Park’s main thrust of economic policy has shifted from “democratization” to “justice.”
After all, bringing the nation’s huge underground economy into the open was one of Park’s economic pledges. Imposing heavy fines on stock manipulators would also help raise money for her welfare programs.
Whatever the president’s motivations, there can be no denying rampant market manipulation is a serious problem hindering the long-term development of Korea’s financial industry. According to the Korea Exchange, the number of “unfair” transactions it ferreted out jumped nearly 60 percent over the past four years. Individual investors lost 1.55 trillion won ($1.4 billion) a year by putting money on 35 “theme-driven” shares.
The time is long past for Korea to unify the currently dispersed activities to crack down on stock manipulators into a single agency, and give it stronger authority, ranging from uncovering fraudulent investors to punishing them, including fine imposition. At present, four different agencies divide the job by phase, making it difficult to punish violators swiftly and sternly and allowing fraudsters to slip through numerous loopholes.
Most advanced countries, including the United States, United Kingdom, France and Japan, have unified crackdown agencies, meaning there is no dearth of benchmarking models for Korea. What’s been lacking was only the will of the financial authorities.
The new president’s attention to the stock market is welcome, but it should go beyond market manipulators to a more fundamental reform.
Local course, which had been called a “gambling den” until the 1980s, has since experienced explosive expansion along with the nation’s economic growth. But it has yet to shake off the dishonorable label of a “playground for speculators,” failing to be a place for sound investors. The only difference is the size of the market and the entry of new speculators from abroad. So much so the local capital market has all but lost its function of raising industrial capital and is reduced to being a producer of a larger number of credit delinquents.
The nation should not discriminate against investors, large or small, and local or foreign. But encouraging free investment is one thing, and sorting out speculators and fraudsters is another.
President Park’s interest in the stock market should serve as an occasion to “normalize” the local bourse in more fundamental ways.
This is The Korea Times editorial for Friday, March, 15, 2013.
