[Viewpoint] Bulls trampling bears in Korea

Though the Chinese are known for their love of gambling, they are not to be outdone by Koreans, who are equally into gambling, if not more so.

The Korea Culture and Tourism Institute published a report last year showing that 3.59 million Koreans, about 9.5 percent of the population, experienced problems in their daily lives due to gambling addictions. Among other issues, online gambling is very big in Korea. We so often hear people hoping for “one big break” or “hitting the jackpot” to turn around their lives. The problem is that such a tendency can be found in financial markets as well, especially in the stock market.

The Chinese love bulls - symbols of an upwardly shooting stock market. A statue of a dashing bull greets visitors in the lobby of the Shanghai Stock Exchange. A bear, a symbol of a downward market trend, is nowhere to be found. In stock exchanges in most developed countries, the bull and the bear usually confront each other.

Korea goes one better. On the Korean Stock Exchange in Yeouido, you will find a poor bear that has been gored by a bull and toppled. When last checked, Korea was the only country in the world to display a defeated bear crushed by a bull at its stock exchange. And while there’s a real bull at the New Year’s ceremony at the stock exchange, the bear absent. Clearly, the bull reflects a strong desire for an upward market.

This being the case, it’s hard to be a skeptic in the Korean stock market.

If you advise a company of a possible stock price drop, the corporate client would get perturbed. Worse, executives at your brokerage company would be unhappy that a skeptical employee has upset a client. It never helps the brokerage business to upset clients.

When the firm advises that stock prices will go up, it can attract more clients. That’s why you will rarely see advice to “sell” stocks in the countless reports produced by securities firms in Korea.

Lee Jong-wu, the director of HMC Investment Securities’ research center, is one of the few pessimists in the financial sector in Korea, and he says that reputation is not what he asked for. He still considers himself a centrist or a rationalist. However, people think differently.

If you want to avoid being called a skeptic, you cannot afford to have a straight perspective on the market. Even if you know for sure that the stock market will plummet tomorrow, you must be able to say everything is okay. Otherwise, you may be treated as someone not quite normal.

When Lee was a new hire, his boss advised him: “When an analyst makes a market forecast, there is only one view. Even if a war breaks out tomorrow, you should say stock prices will rise.”

He confessed earlier this month that his stock market forecast for the year 2009 had been mistaken. He had taken the China variable too lightly and underestimated the power of money released by governments around the world.

Kim Hak-gyun, another skeptic and a researcher at Korea Investment and Securities, said he is embarrassed and feels badly that his forecast of a downward market turned out to have been incorrect. He added that when your prediction of a slump turns out to be wrong, the consequences are far worse than a mistake in the other direction. You could be met with severe criticism and might have to resign.

The market calls the confessions the “surrender of the pessimists.” Some say the last remaining skeptics are disappearing and the stock market of late has been full of rosy predictions.

As the Kospi hovers at the 1,700 level, major securities firms adjusted their end-of-the-year forecasts accordingly. Some predict the Kospi at 1,800 to 1,900. Earlier this year, analysts forecasted a low of 1,150, while the most promising outlook was 1,400.

Finally, a long-cherished dream was realized by the Korean stock market. Korea finally was included in the Financial Times Stock Exchange index of advanced countries. While Korea’s part is small, the upgrade has significant meaning. The Korean stock market’s advancement has been recognized by the international community.

One of the notable characteristics of the developed world is that pessimists are treated fairly. Of course, there are other reasons why the Korean stock market needs the presence of skeptics. Without skeptical analysts, a stock market is like a car with no breaks.

When bears are gone, the market will be crowded only with bulls. Unfortunately, individual investors often have lost big-time money when the market is driven by bulls alone.

*The writer is the economic news editor of the JoongAng Sunday.

by Yi Jung-jae