Crypto-crazy investors make South Korea the best-performing market in Asia

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.South Korea’s inventory market has been supercharged by an investor frenzy over won-based digital cash this month, following newly elected President Lee Jae-myung’s pledge to permit crypto belongings backed by the nationwide foreign money.Shares which were concerned within the Financial institution of Korea’s digital foreign money mission, together with Kakao Pay and LG CNS, have been on a wild journey. Kakao Pay shares greater than doubled this month and LG CNS rose nearly 70 per cent, earlier than paring some beneficial properties this week on profit-taking.On the Kosdaq junior market, fintech safety firm Aton’s inventory jumped 80 per cent, whereas ME2ON, a cellular sport producer, tripled, with its subsidiary just lately launching a dollar-pegged stablecoin for on line casino video games.The wave of retail enthusiasm for the seemingly issuance of won-based stablecoins, together with expectations of shareholder-friendly insurance policies from the brand new authorities, has helped enhance the benchmark Kospi Composite index nearly 30 per cent this yr to a close to four-year excessive. It has additionally made South Korea the best-performing market in Asia within the first half of the yr.The market rally has inspired retail buyers to extend their leverage to chase beneficial properties, with excellent margin loans rising to Won20.5tn ($15bn), in response to knowledge from the Korea Monetary Funding Affiliation.The recognition of shares seen as doubtlessly benefiting from won-based stablecoins comes regardless of the federal government having but to announce the small print of its cryptocurrency insurance policies.Expectations had been fuelled by Lee’s appointment of Kim Yong-beom, a longtime advocate of digital tokens, as his chief coverage adviser, and by a parliamentary invoice proposed by the ruling social gathering this month to advertise the nation’s digital asset trade.The invoice will permit corporations with as little as Won500mn in fairness capital to situation won-based stablecoins — a transfer critics warn might open the floodgates to undercapitalised gamers and trigger systemic dangers.  South Korea is without doubt one of the world’s most vibrant crypto markets, with a few fifth of the nation’s inhabitants buying and selling digital belongings. US dollar-pegged stablecoins buying and selling within the nation hit Won57tn within the first three months of this yr, piling strain on the Financial institution of Korea to speed up preparations to situation its personal digital currencies.Banks, brokerages and fintech corporations are displaying robust curiosity in getting into the enterprise, though the federal government is but to resolve on the issuers and timing.“We’re eager to do the enterprise, however we’re watching out for the place the federal government attracts the road when it comes to regulation,” mentioned a fintech trade government.RecommendedBank of Korea governor Rhee Chang-yong has expressed concern about any issuance of won-pegged stablecoins by non-bank entities, citing their affect on capital flows and the effectiveness of financial coverage. The central financial institution has mentioned it’ll seek the advice of main industrial banks on making ready a second pilot check of its digital foreign money.Nevertheless, consultants have warned that some shares pushed larger by surging curiosity in digital tokens could also be overvalued based mostly on their fundamentals. They’ve urged buyers to train warning because of the volatility of the shares.“Gained-pegged stablecoins are more likely to be launched, however how a lot that may assist enhance company earnings is questionable,” mentioned Hwang Sei-woon, senior analysis fellow at Korea Capital Market Institute. “Investor expectations appear to be overblown, given nonetheless excessive regulatory uncertainties. And a few of the high-flying corporations nonetheless lack the mandatory applied sciences and infrastructure for stablecoins,” he added.