Real-life Squid Game as Korea’s investment boom turns to bust

Almost a year after the release of the insanely popular Netflix series ‘Squid Game’, the Asian nation behind the gruesome drama is paying the price for a real-life quest for untold riches.

Just like the those iconic fictional characters in green suits, millions of South Koreans have bravely risked it all, only to find themselves in a sea of red.

A wave of new retail investors – who until now have enjoyed abundant liquidity and low borrowing costs – are learning a hard lesson: markets can move in both directions.

Game over

Screen Shot 2022 06 21 at 9.47.32 pm korea investors
Just like contestants on Squid Game, Korean retail investors are confronted by a sea of red.

After a period of almost unprecedented growth, stock prices are plummeting and popular cryptocurrencies (like South Korea’s own Terra Luna) have completely collapsed.

The impact on Korean investors is clear on the graph in the tweet below, which shows a sharp rise in forced selling among short-term margin traders.

So, what’s the big deal?

You’d think it doesn’t really matter.

You’d think the losses of relatively inexperienced retail investors couldn’t cause too much harm to the economy.

But you’d be wrong.

In October 2021, Reuters published an article about how retail investors had become the most powerful force in South Korea’s stock market, with the country recording a 49% increase in the number of people investing in domestic stocks.

Millions of South Koreans were jumping head first into the investment world.

Educating themselves on YouTube, they would start investing huge chunks of their salary based on the advice of sometimes unproven ‘experts’.

Korea Investors
The number of South Koreans investing in domestic stocks increased by 49% in 2020.

Cho Seong-bin, a 27 year-old bank worker, revealed how he devotes around half of his monthly salary into stock trading.

“It takes less than an hour to watch some of those YouTube shows and often that’s enough to get the big picture of a particular issue or an industry. It saves a lot more time than reading blogs or books,” he said.

Surviving the game

Koreans like Seong-bin began their investment career like many of the characters on Squid Game.

He was breezing through the first few rounds, aware that the risk of total annihilation was there, but confident it wouldn’t happen to him.

Stocks and cryptocurrencies were increasing by 1,000% or even 10,000% – all eyes were on that prize.

But just like a bullet to the head from a Squid Game villain in a creepy red-suit came 40-year high inflation and rapid rate hikes.

The Korea Composite Stock Price Index (KOSPI) is down 26% from its all-time high in July of last year and Bitcoin – popular among South Koreans – has fallen below $20,000 in a move many considered unthinkable only a few weeks ago.

Some Koreans have already fallen and probably won’t play the game again.

Others have made it to the final rounds, but are suddenly far more aware of the dangers that confront them.

It’s a concern for Korea – and indeed the world – because in 2022, retail investors matter.