The South Korean stock benchmark surpassing the 3,000-point mark last week highlighted the rise of retail investors, which mitigated a series of negative factors that had left the local stock market undervalued, market experts and leaders of financial companies said Thursday.

They were referring to the massive capital injected by individual investors who have pushed up the market index, saying it has helped mitigate the so-called “Korea discount,” which refers to the undervaluing of the Korean stock market by foreign and institutional investors in fear of the nation’s geopolitical instability and governance issues involving family-owned conglomerates. The market sees further room to grow, considering the capital strength of local investors and their growing appetite for investment in the era of ultralow-interest rates.

To celebrate the market’s big event, Korea Exchange Chairman Sohn Byung-doo, Korean Financial Investment Association Chairman Na Jae-chul, Korea Capital Market Institute President Park Young-suk, SK Securities CEO Kim Shin, KB Asset Management CEO Lee Hyun-seung, J.P. Morgan Korea CEO Park Tae-jin and Shinyoung Securities’ head of research Kim Hak-kyun gathered to analyze the recent market rally Thursday.

“Before rising the recent boom in stock investments, the local market was undervalued since retail investors were passive about buying shares. Firms’ high earnings volatilities and low dividends were other negative factors,” said Kim of Shinyoung Securities.

“When the stock market was hit by the COVID-19 pandemic, around 98 trillion won ($89.27 billion) worth of investors’ funds were injected into the stock market among the total household financial assets worth 4,325 trillion won, as of end-September last year, according to the Bank of Korea. During the five trading sessions in January this year, the amount of inflows from retail investors marked 11.3 trillion won, which I’ve never seen in my 24-year career as an analyst.”

While agreeing on the powerful impact of retail investors and their “smart money” investment trend, KB Asset’s chief said retail investors’ abundant market information obtained from YouTube videos was the key to easing the imbalance of data among investors.

Behind the market rally, the total amount of loans taken out for stock investments by individuals has also soared. Some market experts were previously concerned about a possible bubble in the market, but the head of SK Securities said the main bourse was still gaining momentum.

“Referring to the speed of the benchmark, hitting 1,000 points and 2,000 points, the Kospi did not rise too fast. Compared to the market capitalization to gross domestic product in the US, Korea still has more power for a further rally,” he said. “We’re advanced in technologies such as secondary batteries and autonomous driving platforms.”

All the experts said retail investors have learned valuable lessons from the recent events in the market. At the same time, they pointed out, raising dividends and increasing trust in the market are necessary to continually attract investors.

By Jie Ye-eun (yeeun@heraldcorp.com)