The money that South Korean residents pulled out of the stock market has largely gone into 'speculating on cryptocurrencies', based on an article by Chen Hanxue, organized, translated, and written by PANews. (Background: The new character 'Speculator' from 'Squid Game 2' has sparked discussions: Why does South Korea dislike cryptocurrency people so much?) (Additional background: South Korean central bank: over 30% of citizens are speculating on cryptocurrencies! The number of local cryptocurrency investors has surpassed 15.59 million.) This year, Asian stock markets have seen mixed results against the backdrop of a strong U.S. dollar. Some have achieved stock market bull runs at the expense of currency depreciation, while others have sacrificed part of their gains with relatively stable exchange rates. South Korea is a special case: In terms of the Korean won, the Korean Composite Stock Price Index (KSOPI) has fallen 10.0% this year, and considering the depreciation of the won, the KSOPI in U.S. dollar terms has dropped 18.9%, the weakest in Asia. The main declines occurred in the second half of the year. The KSOPI once rose nearly 20% in the first half, but all gains were wiped out in the second half. What happened in South Korea in the second half? Foreign capital fled, and residents clustered together to speculate on cryptocurrencies. From the perspective of capital flows, since the second half of the year, only institutions in South Korea have maintained net buying in the stock market, while the resident sector has been continuously reducing purchases. Foreign investors have become more pessimistic. In November, foreign selling of South Korean stocks reached 4.15 trillion won, marking four consecutive months of net selling. In the two weeks since early December, another 2.4 trillion won was net sold. The money that South Korean residents pulled out of the stock market has largely gone into 'speculating on cryptocurrencies'. Data from the Bank of Korea (BOK) shows that as of November, the number of domestic cryptocurrency investors in South Korea has reached 15.59 million, an increase of 610,000 from the previous month. Currently, 30% of the 51 million South Korean citizens are speculating on cryptocurrencies. The average daily trading volume of South Korea's top five cryptocurrency exchanges—UPbit, Bithumb, Coinone, Korbit, and GOPAX—jumped from 3.4 trillion won in October to 14.9 trillion won in November, more than quadrupling. South Koreans have always been keen on investing in cryptocurrencies. During the first wave of the cryptocurrency bull market in 2017, about 5% of the population participated; in the second round of the bull market in 2021, 10% participated; now this ratio has expanded to 30%. However, historically, the South Korean stock index and Bitcoin prices have shown a positive correlation until October of this year, when this positive correlation was completely broken. So, is the decline in the South Korean stock market to be blamed on Bitcoin? Exports, are they really strong? In 2023, South Korea's exports accounted for 40% of GDP. As an export-oriented economy, exports are a barometer of the South Korean economy. Recent data from the Korea International Trade Association indicates that South Korea's exports seem to be showing signs of recovery. November export data released by the association shows a year-on-year increase of 1.4% in exports, maintaining growth for 14 consecutive months, though the trend has slowed; data from South Korea's customs for the first 10 and 20 days of December shows year-on-year increases of 12.4% and 6.8%, respectively, indicating that South Korea's exports in December should not be weak. However, this phenomenon is more likely a result of concerns over Trump-era tariffs leading to a rush. From the perspective of export fundamentals, South Korea's main export industries—semiconductors, automobiles, and chemical products—are facing unfavorable prospects. The weakness of semiconductors is the first issue. South Korea's major semiconductor giants, Samsung Electronics and SK Hynix, mainly focus on memory chips, which account for only about 30% of the entire semiconductor market. Compared to Taiwan, which has a complete supply chain including chip manufacturing, packaging, and testing, South Korea's presence is weak. According to Trend Force data, TSMC's share in the global foundry market in the second quarter of this year was 62%, while Samsung Electronics was only 11%. The gap between the two companies has widened from 36.5% in Q3 2020 to 51% now. The insufficient policy support is the main reason; South Korea lacks government subsidies similar to those in the U.S., mainland China, and Taiwan, making it difficult to promote domestic chip production. Key materials, components, and devices for South Korea's semiconductor industry also rely heavily on overseas sources. Data from the Korea Customs Service shows that more than half of the 13 sub-sectors of semiconductor devices have long been in a trade deficit state. Particularly, the Yoon Suk-yeol government has chosen to decouple from the Chinese market, leading to a cliff-like drop in South Korea's semiconductor industry, which was highly dependent on China. In 2023, chips shipped by South Korean companies accounted for only 6.3% of China's chip imports, down from over 10% previously. Secondly, the automotive manufacturing industry has also fallen into significant competition disadvantages. In 2023, total global sales of Korean cars exceeded 8 million, a year-on-year increase of over 7%, but the market share of new energy vehicles was only 9.3%. China is currently the world's largest and fastest-growing market for new energy vehicles, with total automobile sales in China for 2023 reaching 30.09 million, and the market share of new energy vehicles reaching 31.6%. The scale of China's automotive industry is nearly four times that of South Korea, with the market share of new energy vehicles being more than four times that of South Korea. Compared to German, American, and Japanese car manufacturers, which actively introduce long-wheelbase and customized models based on the characteristics of Chinese consumers, South Korean car manufacturers have been slow to act and lack sufficient research and development efforts. Coupled with the difficulties of transitioning to new energy, South Korean cars are in a tough position in the Chinese market. Finally, exports of petroleum products (refining industry) also face certain downward pressure. In November, South Korea's largest refiner, SK Energy, announced its Q3 performance: a refining business operating loss of 616.6 billion won (450.2 million USD) for the July-September quarter, the largest loss since Q4 2022. The company stated, "We are in an unfavorable macro environment with falling crude oil prices, and the overall refining product market is under pressure... We will continue to maintain the lowest operating rate of crude oil distillation units (CDUs) to prevent negative profit margins..." Data from the London Metal Exchange indicates that from June to August this year, the refining profit margins in Asia fell to a new low since Q3 2022. Nowadays, with a significant potential for increased production and gradually disappearing demand, the market has a long-term bearish outlook on oil prices, which constrains the refining industry's production and export prospects. The latest survey results from the Korea Enterprise Federation show that due to widespread concerns about export conditions, 65.7% of surveyed companies have already formulated their business plans for next year, with 49.7% of companies indicating 'tight management' as their business policy, the highest level since the 2019 survey. The Bank of Korea stated, "In 2025, additional rate cuts will be implemented to alleviate the downward pressure on the economy." Facing exchange rate headwinds, the Bank of Korea's resoluteness further highlights the economic weakness. Political turmoil has not yet subsided. The recent emergency martial law incident involving the South Korean president has further exacerbated the already weak fundamentals. On November 29, the South Korean National Assembly's Budget Settlement Committee forcibly passed a budget cut plan in the absence of ruling party members, fully cutting special activity funds for the presidential office, the prosecution, the Board of Audit and Inspection, and the police, while significantly reducing the government's emergency reserve fund, totaling a cut of 4.1 trillion won, implying that the Yoon Suk-yeol government will face a halt due to lack of funds next year. On December 3, South Korean President Yoon Suk-yeol declared martial law, escalating the conflict between the presidential office and the National Assembly. The power struggle is essentially a budget dispute, as South Korea has faced severe fiscal pressure over the past two years.