AS THE COVID-19 pandemic reaches its peak, world financial markets are experiencing severe instability. Stock markets are plummeting as experts expect the worst-case scenario this outbreak may trigger: another global recession. However, here in Korea, small-time investors, namely the ants are bulk buying domestic stocks of major Korean conglomerates, yielding a seemingly patriotic outcome of protecting the domestic firms. As their unfounded behavior has drawn much public attention, media outlets have ended up naming this phenomenon, the Dong-hak Ant Movement.

   As Dong-hak Ant Movement continues to hit the front pages of major news coverages, the public naturally became curious on what the term exactly means. As its name indicates, this economic neologism traces its origin back to the 1894 Dong-hak Peasant Movement, an armed rebellion led by the followers of Dong-hak and poor peasants to overthrow the corrupt colonial government, regain Korean cultural identity, and endorse structural reforms**.

   Dong-hak was Joseon’s indigenous culture initiated to drive out Western and Japanese colonial influence in Korea. It blended Buddhism, Confucianism, and Daoism together in one religion and promoted equality in all people. Unlike the Dong-hak Peasant Movement, Dong-hak Ant Movement has been led by ant investors, a Korean term for small investors who are not the major shareholders of a stock company. These investors are symbolically called the “ants” as they resemble ants in their economic size and collective behavior***. 

   Dong-hak Ant Movement refers to the ant investors’ massive purchasing of stocks of domestic incorporations**** sold by foreign investors amidst the current pandemic. It was named as such because their investment behavior has led to a patriotic outcome of shielding the falling stock prices of major Korean conglomerates.

 

   According to a recent report by the Korea Stock Exchange on this unprecedented phenomenon, ant investors have purchased ₩13 trillion of domestic stocks in the Korea Composite Stock Price Index (KOSPI) market, starting from March to April 13. Whenever foreign investors submitted an immense sell order of domestic stocks, the ants have protected their depreciating price by purchasing ₩1 trillion per day. Yonhap News reported on April 8 that ever since the COVID-19 outbreak worsened, the ants’ cumulative net buying of domestic stocks has exceeded ₩20 trillion, a significant index equal to the amount sold by foreign investors within the same period. As foreign investors cashed out of Korea’s stock markets due to the dire economic prospects of the pandemic and instead turned to safe haven assets, the ants succeeded in shielding almost every stock sold by foreign investors in the KOSPI market by purchasing the same amount sold. As a result, despite the pandemic, KOSPI index in March dropped only by 11.69% compared to 23.13% during the 2008 global financial crisis*****. The Financial Service Commissions even acclaimed and expressed gratitude to ant investors for their “patriotic investment.”

   Out of all of their investments, the ants collectively made the largest investment on Samsung Electronics (SE). With over ₩5 trillion in investment, SE outperforms other domestic conglomerates like Hyundai Motor Company, SK Hynix, and Samsung Display Interface by a large margin******. However, this gap shows the ants’ favoritism toward SE, which lead to some media outlets using the term Dong-hak SE Movement instead. Thanks to the ant investors, SE shares recovered to ₩49,100 on April 9 from its lowest ₩42,300 on March 19.

   However, the ants’ purchasing of stocks did not pertain only to domestic companies. A Money Today article pinpoints that the ants have been preoccupied with buying any blue-chip stocks*******which are at top tiers in market capitalization (market-cap)—the indicator used to measure the size of a company. A stock information portal, Seibro, reported that 90% of the entire foreign stock purchases in March was made by ant investors on U.S. stocks. The most favored stock choice was Apple Inc., followed by Tesla Inc., Microsoft Co., and Amazon Inc. The report signifies that the ants’ investments were not only confined to domestic companies but also biased towards U.S. conglomerates as well. In an interview with The Yonsei Annals, an anonymous Economics professor noted, “Unlike the gold-collecting campaign during the Asian Financial Crisis, Dong-hak Ant Movement can be seen as individual’s massive buying of stocks with an expectation of future recovery, rather than a patriotic move to protect domestic companies. Regardless of the motive, ant investors’ purchases can theoretically help shield the stock price if and only if ant investors’ purchases exceed the amount shed by foreign and institutional investors.”

 

   The current frenzy with purchasing domestic stocks is still in progress, and experts have come up with varied interpretations. The most popular opinion is that the ants purchased favorable stocks of large market-cap companies at a falling price, as their cheap prices provide optimal buying opportunities. The ants chose large-cap companies like Apple Inc. and SE as less risky options to make safe investments in the highly volatile stock market, expecting the stock price to rise towards the end of this pandemic. Their preference reflects the common belief that the larger the firm, the less likely it is to shut down. 

   According to Yonhap News, the ants also purchased domestic stocks at a falling price back in 2008 but the 2020 phenomenon is slightly different. Unlike in 2008 when they repeatedly purchased at low prices and sold at high prices to seek short-term profits, they are now making long-term investments. Additionally, while the ants purchased stocks of the then trending ship-building industry in 2008, they now prefer large market-cap companies with a sustainable global vision like SE. Lee Chang-hun, former Chief Investment Officer at Government Employees Pension Service, remarked that the ants in 2020 have become wiser and more confident, thanks to their experiences of past economic crises********.

 

   According to the Korea Financial Investment Association, investors’ deposits in March topped ₩43 trillion, compared to ₩29 trillion in February. However, concerns rise as there is an increasing risk of making unsafe investments. John Lee, the CEO at Meritz Asset Management, views that the current frenzy could be worrisome. “I highly welcome that more individuals are paying attention to stock investment [thanks to Dong-hak Ant Movement]. However, the source of the money matters, whether they are making bank loans for this, or even worse, putting all eggs in one basket.” Chang-hun has also noted in the same interview, “The ultimate goal [of stock investment] must be to earn profits in the market. The ants who have recently entered the market after the old ants should wisely establish their own investment principles to ultimately make positive profits.” John further added that since the purpose of every investment must be to prepare for one’s old age, betting one’s life in SE is indeed a precarious decision to make. The Financial Supervisory Service has also alerted the ants to make affordable portfolio investments. 

 

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   The Dong-hak Ant Movement, thanks to the ants’ massive scale of investment, succeeded in shielding the stock price to a meaningful extent; as such a scale was only theoretically possible in the past, the phenomenon still remains in the center of public attention. Meanwhile, some finance and economic experts were skeptical of the media’s framing that this phenomenon was driven by a purely patriotic motive. Even though they hesitated to make abrupt assumptions, the experts highlighted that the stock market is operated by free market mechanisms, and that investors are innately selfish. Moreover, many of them have advised new ants to make a value investment to a firm that they like instead of chasing after other investors.

 

*The word “selfish” was inspired by and used in the context of Adam Smith’s “Invisible Hand.”

**Encyclopedia Britannica

***Naver Encyclopedia

****Incorporation: Synonyms to a stock company

*****Money Today

******Newsis

*******Blue-chip stock: Stock of a company with excellent reputation for profitability, reliability, and long-term stability

********A podcast interview of Lee Chang-hoon and John Lee by Kim Dong-hwan, the Head of Alternative Economic Research Institute