(EDITORIAL from The Korea Herald on Nov. 9)

Governments are quick to claim credit for a rising stock market, although they have far less control over its course than their rhetoric suggests.

South Korea's market plunge on Friday illustrated the price of confusing an index milestone with an economic achievement. The immediate shock came from abroad. After Democrats made sweeping gains in the US midterm elections, investors feared tighter constraints on AI data center projects and slower infrastructure spending. Wall Street's technology sell-off spread across Asia.

The Kospi fell 6.02 percent to 5,059.69, after touching 4,911.28 and triggering a circuit breaker. Samsung Electronics lost 6.35 percent and SK hynix 10.44 percent. Together, the chipmakers account for nearly half the benchmark's market value.

The sell-off laid bare a narrow corporate base that turns global repricing into domestic shocks. The index had already fallen 44 percent from its June peak.

Data center construction may continue, and the election results do not guarantee a freeze on projects. Yet delays, higher costs or tighter local approvals could postpone artificial intelligence returns and chip orders.

Domestic policy helped turn a vulnerable market into a political showcase. President Lee Jae Myung made the "Kospi 5,000 era" a campaign pledge and later attributed the index's rapid rise to what he called the "normalization of the abnormal." Senior ruling party figures went further, floating targets of 7,000, 8,000 and even 10,000.

Such talk may have been meant to signal confidence. Instead, it encouraged households to regard rising prices as a government-backed promise, feeding the fear of missing out that draws retail investors into speculative rallies.

Regulatory decisions translated that message into policy. Single-stock leveraged exchange-traded funds gave investors another way to magnify exposure during the rally. The National Pension Service, whose job is to manage retirement assets over decades, suspended rebalancing from January through June and raised its target allocation to domestic equities in May from 14.9 percent to 20.8 percent.

Rebalancing can amplify selling in a downturn, and its rules can be adjusted prudently. But suspending them during a rally and lifting the domestic target weakened a mechanism that should remain independent of the government's preferred index level.

The cumulative effect fell heavily on retail investors. Margin borrowing approached 29 trillion won ($21.3 billion), yet warnings about leverage did not match official enthusiasm for market gains.

The government's decision to waive brokerage firms' collateral-ratio maintenance requirement for margin loans for three months may slow forced sales. It cannot erase losses or reduce the debt behind them. If prices keep falling, the measure could defer pressure on investors and lenders rather than resolve it.

A sounder response is to abandon index management as a political project. Regulators should make the costs of leveraged trading clearer and prevent credit-fueled speculation from displacing long-term investment. The pension fund should return to transparent asset-allocation rules, with changes justified by beneficiaries' interests rather than short-term market support.

Emergency action may be needed to prevent disorderly trading, but it should not become a promise to cushion every decline.

The deeper challenge lies in the economy itself. Semiconductor expertise must remain a national priority, but it cannot serve as the sole growth engine. Robotics, biotechnology and renewable energy need conditions in which firms can invest and compete on equal terms. The key is to establish predictable rules and nurture patient capital.