As shares of KOSPI-listed Daeduck Electronics have surged more than 200% this year, investor interest has grown, and so has so-called "debt investing" (borrowing to invest).
Experts said a stock's rise alongside earnings growth is natural, but when margin trading jumps sharply in a short period, the risk of a steep drop increases, requiring caution.
On the 15th, according to the Korea Exchange (KRX), shares of semiconductor printed circuit board (PCB) maker Daeduck Electronics soared 207% this year (Jan. 1–Nov. 14) on a closing-price basis, from 15,390 won to 47,200 won.
This was largely because Daeduck Electronics has been spotlighted as an AI beneficiary by supplying key substrate components such as flip chip-ball grid array (FC-BGA) and multilayer board (MLB) used in AI accelerators and high-performance memory semiconductors.
Daeduck Electronics also posted strong results in the third quarter this year. Revenue came in at 286.1 billion won and operating profit at 24.4 billion won, up 23% and 165%, respectively, from a year earlier. Operating profit beat brokerage estimates (17.5 billion won) by 40%.
A boost also came from the National Pension Service (NPS), the company's second-largest shareholder, buying additional shares. On Sept. 12, the National Pension Service purchased an additional 2,215,874 shares of Daeduck Electronics, raising its equity stake from 8.38% to 12.87%. After the disclosure, Daeduck Electronics jumped about 20% over two trading days.
However, as the stock climbed quickly, margin trading also surged. On the 14th, according to Koscom Check, Daeduck Electronics recorded the 18th-largest increase in margin loan balances among KOSPI-listed corporations over the past three months (Aug. 14–Nov. 14). The balance rose by about 42.8 billion won during this period. It is interpreted that individuals borrowed to buy shares in hopes of further gains, which amplified the stock's rise.
As overheating concerns grew, the Korea Exchange (KRX) on the 12th gave advance notice of designating Daeduck Electronics as an investment warning issue and, on the following day, the 13th, classified it as an investment caution issue.
If the stock keeps rising and becomes an investment warning issue, unsecured margin trades are blocked and margin trading is restricted. If it continues to climb thereafter, it is designated an investment risk issue and trading is suspended for one day.
Brokerages also took steps to prevent overheating. Toss Securities on the 13th downgraded Daeduck Electronics' issue grade from E to F and set the margin requirement at 100%. In effect, margin and unsecured trades were restricted. Korea Investment & Securities the same day classified Daeduck Electronics as ineligible for margin loans. As a result, Daeduck Electronics fell about 11% over the two days from the 13th to the 14th.
Experts noted that an increase in margin loan balances for small and mid-cap stocks can lead to sharp drops. As of the 14th, Daeduck Electronics' market capitalization was 2.3325 trillion won, classifying it as a mid-cap.
Kim Min-gi, a research fellow at the Korea Capital Market Institute, said, "It is natural for margin loan balances to rise as stock prices climb, but for issues with a small share of the overall market and big price swings, the increase in margin trading can be risky."
Meanwhile, brokerages projected that Daeduck Electronics' earnings and share price will trend higher over the medium to long term. Sangsangin Investment & Securities on the day forecast next year's operating profit for Daeduck Electronics at 135.2 billion won, up 116.4% from a year earlier, and raised its target price to 58,000 won. That is 22.9% above the closing price that day (47,200 won).
The capacity expansion for improving MLB production was cited as a risk. Ko Ui-young, an analyst at iM Securities, said, "Due to difficulties in procuring equipment, the pace of MLB capacity expansion is delayed versus plan," and added, "It appears that not until the second quarter next year will production capacity reach the initially expected level."