South Korea's Capital Market Projected to Shrink After 2034 Due to Population Aging

As South Korea transitioned into a super-aged society at the end of last year, forecasts indicate a significant shrinkage in household assets within the capital market, including stocks, funds, and bonds, after peaking in 2034. This trend is attributed to the elderly population's preference for safer assets like real estate or savings deposits over capital market assets, coupled with the younger generation's stagnant participation rate in the capital market.

Understanding the Impact of Aging on Capital Market Assets

According to a report titled "Aging and Household Assets and Consumption" released by the Korea Capital Market Institute on February 12, the aging population is expected to reduce the scale of household capital market asset holdings and decrease the demand for risky assets, such as stocks. The analysis of capital market asset holdings from 2007 to 2021 predicts a peak in 2034, followed by a sharp decline, returning to levels similar to those of 2009 by 2049. In contrast, total assets, net assets, and total financial assets are anticipated to continue their upward trend until 2050, albeit at a decelerating pace.

Challenges and Recommendations

The report highlights the intertwined causes of the elderly's preference for real estate and the younger generation's declining participation in the capital market. With the elderly population exceeding 20% and projected to reach 47.7% by 2072, the demand for stocks and funds may decline. The Korea Capital Market Institute suggests encouraging younger generation participation through policy implementation, restoring market trust, and expanding tax-benefit accounts. Additionally, the importance of AI-based personalized asset management services by securities companies and asset management firms is emphasized to cater to the majority of small investors.