Retail investors' "debt-fueled buying" (borrowing to invest in stocks) has concentrated in NAVER, whose share price has barely risen. Some investors turned to margin trading in hopes of a rebound, but the stock has not climbed and interest costs have grown, deepening the sighs of the debt-fueled cohort.
Margin loans are funds that securities firms lend to individuals. Investors seeking leverage borrow money and pay interest to invest in stocks. It varies by firm and loan term, but the average annual interest rate is around 8% to 9%.
According to the Korea Financial Investment Association on the 24th, as of on the 20th, the stocks with the largest outstanding margin loan balances were Samsung Electronics (1.3926 trillion won), SK hynix (1.2278 trillion won), and Doosan Enerbility (769.5 billion won). All have seen large price swings recently.
The next stock with heavy debt-fueled buying was NAVER, with an outstanding margin loan balance of 710 billion won. The market reacted with puzzlement over the focus on NAVER. Debt-fueled buying typically concentrates in surging stocks, but NAVER shares have been moving in a trading range recently.
Samsung Electronics and SK hynix shares surged amid the U.S.-driven artificial intelligence (AI) boom, drawing in debt-fueled buying. A stock that was around 50,000 won at the start of the year recently topped 100,000 won, and in the case of SK hynix, shares that were around 200,000 won at the start of the year rose to 500,000 to 600,000 won recently.
Doosan Enerbility, a nuclear power stock, is also a case of a surge tied to the AI boom. As AI demand rises, power consumption soars, and with major countries turning to nuclear power, Doosan Enerbility's share price jumped. Shares that were around 20,000 won at the start of the year recently climbed to 70,000 to 80,000 won.
Compared with those stocks, NAVER's share price remains in a trading range. Shares that were around 200,000 won at the start of the year are currently around 260,000 won. While the price is up, the roughly 30% gain is far lower than Samsung Electronics, SK hynix, or Doosan Enerbility.
The securities industry is offering various interpretations. The prevailing view is that, in this sideways market, investors expecting a rebound are buying with credit (loans).
A securities industry official said, "The expansion of margin balances reflects multiple long-term growth drivers, including expectations for a merger between Dunamu and NAVER Finance, strong third-quarter results, and increased AI capital expenditures (CAPEX)," and noted, "For investors, expectations that it will rise further still seem relatively stronger."
Another reason cited for the high level of debt-fueled buying is that NAVER has a higher share of retail investors than other large-cap stocks.
Lee Sang-heon of iM Securities said, "Securities firms require stock collateral of at least 140%. In other words, you need to hold shares to invest on credit," and analyzed, "NAVER has a higher share of retail investing than other stocks, so individual investors who already hold many shares appear to have used leverage to make additional purchases on catalysts such as the merger."
The problem is that, with NAVER shares stuck in a trading range, those who turned to debt-fueled buying are not generating much profit. The basic term for margin transactions is 90 days, extendable up to 270 days, but investors must repay the borrowed funds at maturity.
The interest burden payable to securities firms is also significant. Moreover, if the stock is in loss territory at maturity, investors face repayment pressure. In the end, that can mean forced selling. If the share price plunges, forced liquidation pressure also grows.
A securities industry official said, "If the share price still fails to rise after a certain point and repayment dates cluster, a sharp drop could occur," and added, "Investors should be cautious when margin transactions concentrate in stocks that can hardly rise."