As AsiaPundit noted in a recent item, South Korea had a booming equities market in 2005 - with equity returns up 53.96 percent in local currency terms during the year. So why is AP expecting a bust? While many analysts have said the index has overshot in the past year and have used various accounting measures to suggest that it is already overvalued, AP just has a hunch.:

Here’s a great photo found at the blog of Nyquist Capital.  It’s of a rally to encourage people to invest in the stock market.  The up arrows, gigantic bull, and Rally Korea! sign pretty much gets the message across.  In a way it’s not that much different from those Nasdaq-100 ads with the CEOs of Starbucks, Staples and Microsoft, but in Korea it’s been deemed that there’s a pressing need to broaden participation in the market–in 2005 only 8% of the population owned stock.  Too bad, they’ve really missed out.  I guess that’s why they have a need for this kind of public rally.

One of the strange things about South Korea is that public rallies often work. Moreover, they often work so well that they create brand new problems.  In one of the notable recent examples, the government and banks promoted credit card use to encourage domestic consumerism and reduce tax evasion (cards leave a paper trail). That one worked really, really well.

As the above mentioned Nyquist Capital blog notes:

The shocking thing about this photo is the naked embedded marketing message. Buy now or you will be left behind. This is just one picture, but if this is the tone the exchange wants to set, it looks like the birth of an irrational exuberance investor culture. The folks that run the exchange should realize they are running a market, not a casino.

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