Millennials look to stock market as best chance for ROI

Koreans in their 20s and 30s are pouring millions of won into both domestic and foreign stocks to manage their money, which they see as the most reliable return on investment (ROI) in the face of economic uncertainty wrought by the pandemic.

An office worker in his 30s said he was allocated three shares of SK Biopharmaceuticals' stock during the company’s initial public offering (IPO) after putting up a deposit of 30 million won ($25,800). After the stock was listed on the Kospi, he sold them for 200,000 won per stock, pocketing around 450,000 won after accounting for the initial offering price.

“If I had signed up for an installment savings plan with yearly interest rates of 5 percent, I would only gain 80,000 won per year from the interest after tax for a monthly deposit of 300,000 won,” said the investor.

For him, the highly coveted shares for Big Hit Entertainment, which began receiving IPO deposits from retail investors on Monday, is a bet that may be worth borrowing for.

Retail investors are able to subscribe for the agency’s shares on Monday and Tuesday through stock accounts at NH Investment & Securities, Korea Investment & Securities, Mirae Asset Daewoo and Kiwoom Securities. The subscription rate for institutional investors is 1,117.3, and 60 percent of the total 7.1 million shares that will go public were allocated to institutional investors.

Stock investments by subscription, however, is not always profitable. Stock for Wonbang Tech finished lower than the initial offering price on the first day it was listed on Kospi in September. The company’s stock has still never recovered to their initial price level. There are few instances in which prices sharply rose in the beginning but ended up below IPO level. Shares for Aptamer Sciences, a bio firm that went public on Sept. 16, have been falling short of the IPO price of 25,000 won since the fourth day of its listing.

A 29-year-old employee at a finance firm said he borrowed 140 million won to invest in stock. Recently he suffered a loss of 30 million won from an investment in a bio firm listed on the Kosdaq. However, he said he has not yet considered giving up.

Based on an analysis of new accounts at six main local stock firms — Mirae Asset Daewoo, NH Investment & Securities, Korea Investment & Securities, KB Securities and Kiwoom Securities — 57 percent were owned by investors in their 20s and 30s, many of whom were beginners in the stock market.

That age cohort often uses group chat rooms of online communities to share information on stocks, some of which have more than 1,000 members.

“When something happens, articles or rumors from online stock communities are shared in the chat rooms in real time,” said Mr. Jo, a 28-year-old stock investor and employee at a local firm. “Since the chat rooms are anonymous, the jobs and ages of the members are unknown.”

There are also so-called “reading rooms,” where self-proclaimed experts recommend products for a fee.

“The so-called experts recommend products from time to time. They are not usually blue chips, but often penny stocks,” said Mr. Kim, an employee and stock investor in his 30s. “I have been successful two or three times, but I faced one big failure.”

“Those in their 20s and 30s are experienced with technology, and hence they are very adept in the stock market,” said Koo Jeong-woo, a sociology professor at Sungkyunkwan University. “Since the real estate prices are too high, they think there are no alternatives other than stock investments to be able to afford the stable lifestyles of the former generations.”

There has been an increase in the so-called western ant retail investors, those that make direct retail investments in the stock markets in the West. A stock investor in his 30s said he used to only invest in local stocks in the beginning of the year. But when the American stock market collapsed amid the coronavirus pandemic, he bought shares in Amazon and Netflix worth 12 million won in March upon the suggestion of a co-worker. He said he earned 7 million won in profit after selling them in August.

Last month, he resumed purchasing American stocks. Currently, around 10 items, including Nvidia, Apple and Tesla are on his share account. His investment totaled 48 million won, some of which is a credit loan.

“I look forward to 10:30 p.m. every night, when the New York Stock Exchange opens,” said the employee.

According to the Korea Securities Depository, the value of foreign stock traded by local investors this year, through Sept. 25, has been $130.7 million, more than three times the amount traded throughout 2019. During the first nine months of this year, Tesla’s stock was purchased mostly by local investors. As Tesla’s stock prices have been declining following a peak at the end of August, the loss valuation of local investors has been significant.

New services that enable purchases of miniscule shares, such as sales of 0.0001 shares for $3, have been popular among the younger age groups. Based on an analysis of app Mini Stock, which facilitates small-scale transactions of foreign stock, 71.2 percent of its users are in their 20s and 30s.

“Google, Apple and Tesla are popular items among young people in the country,” said Pyun Deuk-hyun, the vice president of asset management strategy at NH Investment & Securities. “The coronavirus pandemic has encouraged those with little interest in buying American stocks to actually buy them.”

BY HWANG EUI-YOUNG, SUNG JI-WON, HONG JI-YU [lee.jeeyoung1@joongang.co.kr]