Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Korea sees 15-fold surge in underage stock investors since 2019
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By Yi Whan-woo
Brokerages set sights on young investors
The number of Korean minors who own shares increased more than 15 times from 2019 to 2023, driven by a growing trend of parents gifting stocks to their children. This trend reflects the hopes of parents that their children will learn about investing and money management starting at a young age.
According to data released by KB Securities, Tuesday, a total of 175,260 customers who are aged 18 or under traded stocks via the brokerage in 2023.
The number marked a steep increase from 11,632 in 2019.
KB Securities said clients aged 18 or under accounted for only 1.5 percent of the brokerage’s total customers in 2019, but rose to 5.93 percent in 2023.
"For instance, parents are now giving stocks instead of cash on Seollal," noted the brokerage house, contrasting this with the traditional practice of giving cash as a reward for ceremonial bows to parents and older relatives during the Lunar New Year holiday.
If a parent had purchased Samsung Electronics shares for their child right after the Lunar New Year holiday in 2014 and the child had held onto them, the investment return could be nearly triple the initial amount.
"I've been buying Samsung Electronics' shares for my son with money he got during Lunar New Year each year, but bought other shares in case he had some other choices. The total investment is not huge, but he checks the investment return from time to time," a stock investor wrote at an online forum.
Multiple brokerage houses are now targeting children as potential new customers after the holiday, even offering cash-equivalent gifts for minors who open new stock trading accounts.
The increasing number of minor stockholders and the rising value of stocks held by them are also partly due to affluent families utilizing stocks to alleviate the burden of gift and inheritance taxes when transferring wealth to their children.
According to the Financial Supervisory Service, the total value of stocks owned by minors surpassed 1.5 trillion won ($1.12 billion) as of the third quarter of 2023.
The breakdown of the value of stocks held by minors is as follows: those aged six or younger held stocks worth 272.1 billion won, while those between seven and 12 held stocks worth 468.7 billion won. The remaining 788.8 billion won was held by minors aged between 13 and 18.
The ratio of Korea’s gift and inheritance taxes to its gross domestic product (GDP) was 0.7 percent in 2021, which was on a par with France and Belgium. The three countries jointly ranked at the top among members of the Organization for Economic Cooperation and Development (OECD).
KB Securities also highlighted the influx of new retail investors, including minors, who entered the stock market during and after the COVID-19 pandemic.
The pandemic hit the global economy hard, but on the other hand, the benchmark KOPSI at one point topped the 3,000-point milestone in January 2021, driven by hopes of an economic recovery from the coronavirus pandemic.
A separate study by Hankook Research showed 43 percent of retail investors in 2021 responded that they either started investing in stocks in 2020 or after the KOSPI surpassed the 3,000-point mark.
Some 92 percent of the new comers to the market expressed their intention to continue investing even after the pandemic subsides.
"Under the circumstances, the pandemic can be seen as a turning point, as it marked the beginning of a significant increase in the number of underage stock investors. Eventually, this number grew more than 15 times larger compared to 2019," KB Securities noted.