RETAIL INVESTORS IN THE KOREAN CAPITAL MARKET Sung Uk Yang Korea Financial Investment Association Senior Director of International Affairs Dept
C O N T E N T S 1. Overview of Stock Investors in Korea 2. Current Status by Investor Type 3. Investment Preferences by Investor Type 4. Stock Price Index and Trading 5. Online Investing by Individual Investors 6. Investor Protection Regulations
1 Overview of Stock Investors in Korea (2013) The number of investors increased by 60,000 YoY to record 5.07 million 1. Investor Overview Percentage of economically active population Percentage of total population Average age 47.8 years 19.5% 10.0% Trends in no. of investors The increase in investors is attributable to the stabilization of stock prices and expansion of the economically active population (+0.6 mn) * KOSPI avg: 1,983 ( 11) 1,930 ( 12) 1,985 ( 13) The average age of investors saw a decrease, since older investors prefer pension funds or insurance products over direct investment in the stock market, as they prepare for retirement (unit: 1,000 ppl.) 3,949 3,507 4,591 5,233 5,020 02 03 04 05 06 07 08 09 10 11 12 13 3
2 Current Status of Investments by Investor Type (2013) Retail investors: more than 5 million individual investors, 18,000 corporate investors Institutional investors: 849, mostly financial institutions Retail investors and institutional investors held 47.7% and 16.1% of stocks on the KOSPI market, respectively 2. Current Status by Investor Type No. of investors by type (Source: KRX) Proportion of stocks held by investors (Source: KRX, Unit: %) Type Number Type 2012 2013 Individual 5,019,774 Corporation 18,128 Foreign 37,611 Institutional 849 Total 5,076,362 Individual 24.0 23.6 Corporation 24.5 24.1 Foreign 32.4 32.9 Institutional 15.8 16.1 Government 3.2 3.3 Total 100 100 4
3 Investment Preferences by Investor Type The proportions of stocks and KOSPI 200 options traded by individual investors on the KRX market are 44.3% and 32.2%, respectively As bonds are traded on a large scale, most bond transactions were made by institutional investors Trading value by investor type (Duration: Jan.1-Oct.17, 2014, Unit: $ bn.) 3. Investment Preference by Type Investor Type Trading value Stocks Propo rtion KOSPI 200 Options Trading value Proport ion Trading value Bonds Proport ion Trading value Funds* Propo rtion Institutional 342 24.2 35 12.4 2,116 99.5 172 50.5 Corporation 18 1.3 2 0.9 2 0.1 67 19.7 Individual 626 44.3 92 32.2 8 0.4 101 29.8 Foreign 427 30.2 156 54.6 0 0 - - Total 1,415 100 286 100 2,126 100 340 100 * Funds: based on AUM as of Aug. 29, 2014 5
May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 4 Stock Price Index and Trading Trading by individual investors and institutional investors tends to show an inverse relationship There has been net buying by institutional investors and net selling by individual investors between the end of 2012 and the present 2,500 40.0 30.0 2,000 20.0 4. 3. Stock Investment Price reference Index and by Trading Type 1,500 10.0 - Stock price index 1,000 500-10.0-20.0-30.0 Individual investors Institutional investors -40.0 - -50.0 6
5 Online Investing by Individual Investors The proportion of online trading has risen significantly since the introduction of the system in the late 90s The proportion of online trading for individual investors was 83%, and only 1% for institutional investors (as of the end of June 2014) The main reason individual investors are attracted to online trading is low commission fees (0.02% of the trading value) Proportion of online trading by investor type (unit: %) 75 74 77 75 82 82 89 91 83 84 83 5. Online Investing y Individual Investors 기관 Institutional 개인 Individual 일반법인 Corporation 16 17 12 12 14 13 14 14 14 14 14 3 2 3 2 2 2 2 1 1 1 1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 7
6 Investor Protection Regulations Individual investors possess a lower level of professional knowledge and trading capabilities in comparison to institutional investors It is imperative to provide investor protection through systems and regulations With the protection of retail investors receiving attention on the global stage, Korean regulatory authorities have been reinforcing regulations to help promote investor protection. Investor Protection Regulations Korean Regulations Investor Protection Investor Education Know Your Customer s Rule & Prevention of Misselling Inhibition of unfair business practice between affiliated companies Disclosure Requirements Regulation regarding Soft Dollars Global Regulations Investor Protection The Role of Custodian Service (European against US Model), which is related to Safe Keeping of Client Asset Hedge fund regulation in Europe compared to non-regulated hedge fund in US Disclosure of regulatory differences when selling cross-border products to retail investors Value of Disclosure from the perspective of Behavioral Economics Cyber Crime and Cyber Disruption, which are all related with cyber resilience for Business Continuity Plan 8
2014 ASF Annual General Meeting Thank you!