South Korea's stock market's "secret weapon leading the world": When the president "used to be a rookie investor"

Before transforming South Korea into the world’s hottest stock market, Lee Jae-myung was just a trading novice in his thirties, losing money month after month. This painful experience of being “weeded out” has now become the driving force behind his push for financial reform—he firmly believes that his past losses were repeatedly amplified by unfair dealings by controlling shareholders.

Since taking office in June last year, Lee Jae-myung has implemented a series of aggressive reforms, including rules for shareholder rights equality and strengthened board accountability. These measures sparked the biggest rally in the world’s largest stock market. On the 23rd, the Korea Composite Stock Price Index (KOSPI) rose by 2%, marking a 36% increase this year, with a total gain of 115% since Lee Jae-myung took office, far exceeding his campaign target of “KOSPI 5000.”

This rally has made Lee Jae-myung a “folk hero” among South Korea’s 14 million retail investors. According to Gallup Korea, his approval rating rose to 63% in mid-February, reaching a new high in over three months. The reforms are also reshaping Koreans’ wealth perceptions—real estate once accounted for nearly three-quarters of household assets, but Peter S. Kim, global investment strategist at KB Securities, says, “The overconcentration of real estate relative to financial assets is about to reverse, and this is one of the most profound trends in Korea over the next decade.”

However, analysts attribute only part of the credit to Lee Jae-myung’s reforms. Mixo Das, head of Korea equity strategy at J.P. Morgan, points out that the global AI boom has driven up stocks like Samsung Electronics and SK Hynix, “Reforms are important and do help with valuations, but saying the KOSPI reaching 5000 is solely due to government policy might be overstating the impact.” Many economists say more evidence is needed to prove that the stock market rally truly promotes growth; otherwise, even within his own party, some worry that Lee’s obsession with the stock market could ultimately backfire.

From Retail Losses to Reform Determination

Lee Jae-myung’s early career was full of challenges. According to media reports citing close aides, he realized early on that his government salary was modest, so he started trading stocks as a side job, but it didn’t go smoothly at first. “I became a day trader, trading all day… looking back, it was completely reckless,” he recalled in an interview with the popular YouTube channel 3Pro TV, “I lost everything, was completely wiped out.”

Sources close to Lee Jae-myung also reveal that his troubles weren’t due to poor trading skills but were largely caused by unfair dealings where controlling shareholders repeatedly exploited ordinary investors for personal gain. South Korea’s business laws tie board members’ interests to major shareholders rather than all shareholders, further exacerbating this imbalance. Investors have flagged multiple transactions as warning signs, including the 2015 merger of two Samsung affiliates, despite warnings from Elliott Management that a low buyout price would harm shareholder interests.

In 2022, when Lee Jae-myung first ran for president as a Democratic Party candidate, he proposed the slogan “KOSPI 5000.” “I think KOSPI 5000 is not difficult,” he said on 3Pro TV, “If you believe in me, you should be more interested in the stock market.” He narrowly lost to Yoon Suk Yeol, amid voter disappointment over the previous Democratic government’s failure to address housing and economic inequality.

Unexpected Reform Results

In June last year, Lee Jae-myung relied on the promise of reaching KOSPI 5000 to regain voter trust and become president. Initially, investors were skeptical of his campaign; Namuh Rhee, chairman of the Korea Corporate Governance Forum, said that past reforms “have never succeeded regardless of which party was in power.” But within a month of taking office, Lee pushed through amendments to expand trust responsibilities to improve board accountability, then reformed dividend taxes to encourage payouts, increased enforcement resources to crack down on market violations, and announced a roadmap for inclusion in MSCI’s developed markets index.

“Every promise from previous governments was disappointing, but this time is different,” Rhee added. Democratic Party legislator Oh Gi Hyoung, who leads the KOSPI 5000 special committee, said, “The pace of the rally has far exceeded our expectations.” The committee has recently been renamed the K Capital Market Committee.

To demonstrate his resolve, Lee bought domestic stock ETFs worth 40 million won (about $27,600) just days before the June election, and pledged to invest 1 million won monthly for five years after winning. By September, these investments had yielded a 26.4% return. Last year, the head of financial regulators also sold a luxury apartment in Seoul’s Gangnam district and shifted funds into exchange-traded funds.

Challenges and Doubts

Despite the strong momentum, challenges remain. South Korea’s economy contracted in the fourth quarter, highlighting the difficulty of reversing the trend under Lee’s government. Weak protections for minority shareholders and sluggish growth have caused many retail investors to remain cautious, leading to capital outflows and record inflows into U.S. stock markets, which in turn weaken the won. Democratic Party lawmaker Park Hong Bae warned, “Lee Jae-myung might believe that if we don’t take measures to address deep mistrust in the capital markets, eventually all citizens will be investing in U.S. stocks.”

Some party insiders worry that Lee must prove he can elevate the prosperity of all Koreans—not just the wealthy—by tackling inequality. South Korean households carry one of the highest debt burdens globally, which Lee himself calls a “time bomb,” largely due to soaring apartment prices. Meanwhile, decades of export-driven growth have made the economy highly sensitive to global demand shocks, making stock market gains as a wealth effect even more critical.

Last month, Lee stated at a cabinet meeting that Korea’s long-underestimated capital market “is becoming a solid foundation for future innovative industry growth and healthy accumulation of national wealth.” The presidential office told Bloomberg News that efforts are underway to strengthen market trust by curbing manipulation and promoting long-term investment.

Next Steps

The real estate market remains overheated despite repeated efforts to curb speculation, and regional disparities persist. However, KB Financial Group’s recent report notes that “the priorities of high-net-worth individuals in domestic real estate and stocks are converging,” a rare sign of rising market interest.

In early February, Lee issued a stern warning to homeowners, giving them a “last chance” to sell excess properties before the government raises property taxes, vowing to “do whatever it takes” to curb housing prices. His government announced plans last month to accelerate new housing construction as part of supply-side reforms. His next priorities include canceling share buybacks, rooting out insider trading, and delisting unprofitable zombie companies.

Lee often reminds the public that he was once a “big ant.” One day, when his political career finally ends, he plans to settle down and once again dedicate his time to stock trading.

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