Local Markets Out, Crypto In: South Korea’s Youth Investors Make Bold Shift

South Korean youth are abandoning their domestic stock markets at unprecedented rates, instead directing their investments toward US stocks and cryptocurrencies.

Declining Youth Participation

The Korea Securities Depository reports investors in their 20s represented just 9.8% of the market last year, down from 14.9% in 2021. Those in their 30s decreased to 18.8% from 20.7%.

Stock ownership among 30-somethings fell from 9.9% to 7% between 2020 and 2024, while 20-somethings’ ownership dropped from 2.2% to 1.6%.

Even investors in their 40s saw their market share decline from 23% to 22.1%. This exodus has left investors aged 50+ holding a dominant 71% of domestic stocks.

Market Weakness

According to a report by the Korea Joongang Daily, Korean markets are showing troubling signs as young traders exit. Daily trading volume fell from about 23 trillion won ($16 billion) in early 2024 to approximately 18 trillion won by year-end.

“A market that loses younger investors can’t be called healthy,” warned Kim Sang-bong, economics professor at Hansung University.

Nearly half (47.8%) of cryptocurrency investors in Korea were in their 20s and 30s last year. Their trading volume on Korea’s five major crypto exchanges exceeded 2.50 quadrillion won, representing almost 74% of all retail trading on the Kospi.

Korean investors also nearly doubled foreign stock transactions in 2023, from 59 billion shares to 112 billion. This growth continued in 2024, increasing another 39% to 156 billion shares. In this year’s first quarter alone, Koreans made record net purchases of nearly $11 billion in US stocks.

The primary reason for this migration is performance. While Korean markets have struggled, the Nasdaq Composite climbed 50% in 2023 and another 25% in 2024.

About 72% of Korean investors in US stocks earned money in 2023, compared to just 48% in domestic stocks. Cryptocurrencies performed even better, with Bitcoin surging over 160% last year to reach $108,249, its all-time peak.

Korean markets also suffer from structural problems, with the country’s dividend payout ratio of 27% ranking last among 16 major economies.

While many experts believe fundamental changes in corporate governance are needed, others see this as temporary.

“If the Korean market rebounds, they’ll return just as quickly,” said Roh Geun-chang of Hyundai Motor Securities.

Featured image from Medium, chart from TradingView