There is a term called 'Yongpal-i.' It is a derogatory term for malicious electronics vendors in Yongsan Electronics Market, and it is commonly used online to refer to those who exploit innocent buyers by taking advantage of information asymmetry. It is a story from the late 20th century when even small shop owners in the Yongsan area could earn money comparable to that of conglomerates. The term 'Yongpal-i' has also been slightly modified and frequently used to refer to some unscrupulous used car dealers or certain seafood markets.
Before the activation of online platforms, electronics vendors in the Yongsan area were the most prevalent in the country. Consumers wanting to purchase computer parts, audio equipment, new game consoles, and mobile phones had no choice but to flock to Yongsan. Before the internet became widespread, consumers' only means of obtaining information was by checking out various physical stores.
Some unscrupulous merchants used this to commit tax evasion through price collusion or by coercing cash payments, and there were even incidents of extortion and assault. The incident known as 'Do you want to be hit, customer?' revealed through an undercover investigation by KBS News9 in 2007 is a famous anecdote. At that time, when a reporter disguised as a customer asked only for a price and attempted to leave, the unscrupulous merchant threatened, saying, 'Do you want to be hit, customer?' Many people over middle age may recall seeing this broadcast nationwide.
The notorious tactics of some Yongpal-i gradually diminished due to the widespread use of the internet, the emergence of price comparison services, and the activation of direct purchasing. Consumers were able to learn which vendors conducted honest business through online communities, and price comparison websites allowed them to easily recognize market prices. Even when trying to collude, the alternative of direct purchasing made it impossible to go beyond reasonable levels. At the same time, government authorities made efforts to clean the market by actively cracking down on tax evasion and coercive sales. Furthermore, the recent redevelopment waves in the Yongsan area have caused the electronics market to disappear one by one, and Yongpal-i has become a story of the past.
The emergence and disappearance of the Yongpal-i tactics that tormented many innocent electronics buyers in the past is a textbook case showing how an oligopolistic market with information asymmetry can fester and how quickly the market itself can disappear with transparent information distribution and monopoly alleviation. In the short term, it is somewhat natural for a monopoly vendor with superior information to distort the market to reap excessive profits, as it reflects a certain human desire.However, the reason many vendors conduct honest operations is that acts of taking excessive profits promote the emergence of new competitors, ultimately reducing long-term benefits. Transparent information and fair competition, which are the foundation of capitalism, are key requirements for the market to function properly. Continuous self-regulation efforts from vendors, along with active government intervention, are essential.
Currently, many retail investors in the South Korean stock market are likely experiencing a similar sense of discomfort as those who bought electronics from the Yongpal-i in the past. While corporate performance is good, stock prices continuously drop instead of rising, and cases where companies, after a big investment based on future growth potential, partition their core divisions into separate listings lead to shareholders suffering losses frequently. It is common for initial public offering (IPO) offered prices to be inflated. Therefore, long-term investment is considered unwise, and most participants in the South Korean stock market see profit in making gains during the volatility that typically occurs early in IPOs.
Stocks represent capital for corporations. The reason corporations issue stocks through public offerings is to facilitate capital acquisition. As corporations grow, the required capital increases dramatically, making borrowing from banks or issuing bonds limited. Unlike loans or bonds, issuing stocks is a capital acquisition method that does not require repayment of money. In return, shareholders share the profits and risks of the company's operational performance in proportion to their investment. This is the basis of capitalism and a core operational principle.
The stock market inherently exhibits significant information asymmetry. Corporate insiders inevitably possess crucial information related to business before anyone else, and professional investors or 'big hands' find it easier to access information than individual retail investors. To function normally, markets must resolve information asymmetry; therefore, most capital markets apply stringent regulations and legal measures to achieve this. For instance, insider trading is prohibited, and corporations are mandated to provide transparent disclosures.
A stock market where such regulations function well is referred to as an advanced market. The U.S. stock market is the most representative example. In an advanced stock market, corporate performance is thoroughly shared with shareholders through stock price appreciation or dividends. This gradually strengthens investor trust, and additional capital inevitably flows into that stock market. This naturally leads to an increase in corporate value, or value up. As a result, the capital acquisition of corporations becomes easier, management improves, and ultimately, the economy of the respective country grows.
Sadly, as most citizens in this country recognize, the South Korean stock market is not functioning properly. The biggest problem is that corporate performance is not being effectively communicated to shareholders. A striking example is the disparity between market capitalization (hereinafter referred to as market cap) and the stock index. From 2002 to 2024, the market cap of the South Korean stock market grew approximately 7.8 times. During the same period, the U.S. stock market increased by 9.3 times, which is not a significant difference. The issue is that while the U.S. stock index recorded a rise almost identical to the market cap, the South Korean stock index showed progress of barely reaching half of the market cap. To put it extremely, half of the value increase of South Korean corporations has gone into someone else's pockets rather than shareholders.
Without resolving such situations, the South Korean stock market has no chance of gaining investor trust. While the performance of corporations may be uncertain, in a market where successful management results do not return to shareholders and only losses are passed on, it would be strange for anyone to invest. Even if trust is lost, there could still be a chance for the market to run if there are no alternatives, but unlike in the past, individual investors have found it easier to directly invest overseas through innovative financial products such as exchange-traded funds (ETFs). The recent surge in the proportion of individual investors engaging in overseas investments is inevitable.
The normalization of the domestic stock market has significant implications for the economy and society. A healthy capital market serves as the basis for domestic corporations to acquire capital, and strengthening corporate capabilities positively impacts the economy as a whole, such as increasing jobs. Additionally, if the means of storing excess asset value of the people, which has been confined to real estate, expands to the stock market, it will clearly have positive effects on our economy in the long run.
Recently, debates surrounding amendments to the Capital Market Act and the Commercial Act have intensified. To avoid repeating the mistakes of Yongpal-i, who disappeared due to being blinded by short-term profits, it seems clear what path the South Korean stock market must take.