"Debt-financed investing is still investing"…Financial authorities shift stance as KOSPI nears 5000

Kwon Dae-young, Vice Chairman of the Financial Services Commission,

"KOSPI 5000... of course possible"

"Among 10-year returns for real estate, deposits and stocks, stocks have the highest returns"

"Should invest focusing on value stocks with high dividends and high corporate value"

As the KOSPI approaches the 5000 level, the financial authorities' view on 'debt-financed investing (borrowing to invest)' has also changed. Vice Chairman Kwon Dae-young of the Financial Services Commission said, "We have viewed debt-financed investing negatively, but I think it can be seen as a form of leverage," adding, "It can be seen as a type of leveraged investment."

Vice Chairman Kwon made these remarks on the 4th during an appearance on CBS's 'Kim Hyun-jung's News Show.' He also said, "It is necessary to manage an appropriate level of portfolio and engage in stock investment at a tolerable level."

Kwon's comments are interpreted as a step back from the financial authorities' previous stance of warning against debt-financed investing. In the past, the authorities warned against the spread of debt-financed investing and called for stricter regulation of margin loans. Securities firms responded by reducing margin loan limits and sometimes suspending new margin loans for certain theme stocks.

He also emphasized that stocks had the highest 10-year returns compared to real estate. Vice Chairman Kwon said, "When I was a section chief, I directly analyzed the 10-year returns of real estate, deposits and stocks, and stocks had the highest returns," adding, "Although many people suffer losses from short-term trading, in the long term stocks are the most efficient asset." He also advised, "It is desirable to make long-term, stable investments centered on value stocks with high dividends and high corporate value."

He cited improvements such as strengthened market fairness, enhancement of shareholder value, moves to amend the Commercial Act, improved corporate earnings, and the resolution of uncertainty through the APEC meeting as reasons for the recent record highs in the KOSPI. He evaluated, "Jensen Huang's visit to Korea is a symbolic event that shows the possibility that Korea is becoming a key production base within the AI industrial transition."

He also expressed a positive view on the KOSPI reaching 5000. Vice Chairman Kwon said, "A tailwind is blowing as the government's policy will and the global liquidity environment come together," and added, "It is not appropriate to mention specific index numbers, but the Korean stock market will steadily trend upward."

He went on to say, "For unfair trades such as stock-price manipulation, we will impose fines of up to six times the unjust gains, and expel offenders from the market by imposing employment restrictions on listed company executives or banning the opening of securities accounts," adding, "We will strip economic benefits and block re-entry."

He also said, "We will strengthen the institutional foundation so that market trust can be raised and a long-term investment culture can take root," adding, "A fair and transparent market is the basis for sustained stock-price increases."

Reporter Park Ju-yeon grumpy_cat@hankyung.com