Before transforming South Korea into one of the world's hottest stock markets, Lee Jae-myung was a novice trader in his thirties, losing money month after month. This painful experience of being a "retail investor casualty" has now become the driving force behind the South Korean President's push for financial reform—he firmly believes his losses were repeatedly magnified by unfair transactions favoring controlling shareholders.

Since taking office in June last year, Lee Jae-myung has implemented a series of radical reforms, including rules for equalizing shareholder rights and strengthening board accountability. These measures have ignited the largest stock market rally globally. On the 23rd, the Korea Composite Stock Price Index (KOSPI) extended gains to 2%, bringing its year-to-date increase to 36% and a cumulative surge of 115% since Lee Jae-myung assumed office, far surpassing his campaign pledge of "KOSPI 5000."

This rally has made Lee Jae-myung a "folk hero" among South Korea's 14 million retail investors. According to a Gallup Korea survey, his approval rating rose to 63% in mid-February, hitting a three-month high. The reforms are also reshaping South Koreans' wealth perception—real estate once accounted for nearly three-quarters of household assets. Peter S. Kim, a global investment strategist at KB Securities, stated, "The excessive concentration in real estate relative to financial assets is set to reverse; this is one of the most profound trends in South Korea over the next decade."

However, analysts attribute only part of the credit to Lee Jae-myung's reforms. Mixo Das, J.P. Morgan's head of South Korea equity strategy, pointed out that the global AI boom has driven gains in South Korean tech stocks like Samsung Electronics and SK Hynix. "Reforms are important and do help valuations, but attributing the KOSPI's rise to 5000 solely to government policy likely overstates their impact," he said. Many economists noted that more evidence is needed to prove the stock market surge genuinely boosts growth; otherwise, even within Lee Jae-myung's party, some worry that his obsession with the market could backfire.

**From Retail Losses to Reform Resolve** Lee Jae-myung's early career was challenging. According to media reports citing a close aide, after realizing his public service income was meager, Lee began stock trading as a side business but initially struggled. "I became a day trader, trading all day... Looking back, it was utterly reckless," he later recalled in an interview on 3Pro TV's YouTube channel, popular among retail investors. "I lost everything, completely wiped out."

Multiple sources close to Lee Jae-myung revealed that what troubled him was not poor trading skills but unfair transactions where controlling shareholders profited at the expense of ordinary investors, repeatedly amplifying his losses. South Korea's commercial regulations, which tie board members' interests to major shareholders rather than all shareholders, further exacerbated this imbalance. Investors have flagged several transactions as warnings, including the 2015 merger of two Samsung affiliates, despite Elliott Management's warning that the low acquisition price would harm shareholder interests.

In 2022, during his first presidential campaign as the Democratic Party candidate, Lee Jae-myung introduced the "KOSPI 5000" slogan. "I don't think KOSPI 5000 is difficult," he said on the 3Pro TV YouTube channel. "If you believe me, you should take more interest in the stock market." He lost to Yoon Suk Yeol by the narrowest margin in South Korean history, with voters disappointed by the previous Democratic government's failure to address housing and economic inequality.

**Reform Outcomes Exceeding Expectations** Last June, Lee Jae-myung won back voter trust with his KOSPI 5000 pledge and became president. Investors were initially skeptical of his campaign. Namuh Rhee, chairman of the Korea Corporate Governance Forum, noted that past reforms "never succeeded, regardless of the ruling party." However, within a month of taking office, Lee pushed through amendments to broaden fiduciary duties and enhance board accountability, followed by reforms to dividend taxes to encourage payouts, expanded enforcement resources to combat market abuse, and a roadmap for advanced market status inclusion via MSCI.

"Every promise by previous governments was disappointing, but this time is different," Rhee added. Oh Gi-hyoung, a Democratic Party lawmaker leading the special committee on KOSPI 5000 (recently renamed the K-Capital Market Committee), stated, "The pace of the rally has far exceeded our expectations."

To demonstrate commitment, days before the June election, Lee purchased 40 million won (approximately $27,600) in domestic stock ETFs and pledged to invest 1 million won monthly for five years if elected. By September, these investments had yielded a 26.4% return. Last year, the head of the financial regulatory agency also sold an apartment in Seoul's affluent Gangnam district to buy exchange-traded funds.

**Challenges and Skepticism Remain** Despite strong momentum, challenges persist. South Korea's economy contracted in the fourth quarter, highlighting the difficulty for Lee Jae-myung's administration to reverse the situation. Weak protections for minority shareholders and sluggish growth have left many retail investors on the sidelines during the rally, driving capital outflow and record investments into U.S. stocks, thereby weakening the Korean won. Democratic Party lawmaker Park Hong-bae said, "Lee Jae-myung likely believes that if we do nothing about the deep distrust in capital markets, we may eventually see all citizens investing in U.S. stocks."

Some within his party worry that Lee must prove he is boosting prosperity for all South Koreans—not just the wealthy—by addressing inequality. South Korean households carry one of the world's highest debt burdens, which Lee himself called a "ticking time bomb," largely due to soaring apartment prices. Meanwhile, decades of export-driven growth have made the economy highly sensitive to global demand shocks, making the translation of stock market gains into wealth effects even more critical.

Last month, Lee told a cabinet meeting that South Korea's long-undervalued capital markets "are being reborn as a solid foundation for future innovative industry growth and healthy accumulation of national wealth." The presidential office, in a statement to Bloomberg News, said it is committed to enhancing market trust by curbing manipulation and promoting long-term investment.

**Next Steps on the Agenda** The real estate market remains overheated, with regional disparities persisting despite repeated government efforts to curb speculation. However, a recent KB Financial Group report noted that high-net-worth individuals now prioritize domestic real estate and stocks equally—a rare signal of rising market interest.

In early February, Lee issued an unusually stern warning to homeowners, giving them a "final opportunity" to sell excess properties before the government raises real estate taxes and vowing to curb prices "at all costs." His administration last month announced plans to accelerate new home construction as part of supply-side reforms. His next priorities include abolishing treasury stock practices, rooting out illegal activities like insider trading, and delisting unprofitable zombie companies.

Lee often reminds the public in speeches that he was once a "big ant" (a term for retail investors). He has said that when his political career eventually ends, he plans to settle down and devote time to stock trading once again.