Ahead of the U.S. Federal Reserve's Federal Open Market Committee (FOMC) decision to cut rates, "debt-fueled investing" in Korea's stock market is hitting a record high day after day.
According to the Korea Financial Investment Association on the 10th, as of the 8th, the balance of margin loans (credit extensions) stood at 2.73554 trillion won, marking an all-time high.
A margin loan is when an individual borrows money from a brokerage to buy stocks, and a surge in the balance means more aggressive investors are increasing.
In the market, the probability that the FOMC will carry out a 0.25 percentage point cut on the 18th (local time) is seen at 88.4% (based on CME FedWatch), and expectations that stocks will rise further after the cut are fueling debt-fueled investing.
Kang So-hyun, senior research fellow at the Capital Market Research Institute, said, "It reflects the psychology that even by taking on debt, if the stock market rises, the revenue can easily surpass the interest expense."
The fear of missing out (FOMO) phenomenon is also seen as stoking debt-fueled investing. The KOSPI, which was trading around the 2,300 level in April, continued a rally from May and quickly broke through the 4,200 level at the end of Oct. As the index rebounded in Dec., rising about 5.69%, investors who failed to earn revenue during the upswing are believed to have been influenced by the psychology of "even if it's the last train, I'll get on."
Cash on the sidelines waiting to enter the market after the FOMC is also rising quickly. As of the 8th, investor deposits stood at 7.93859 trillion won, up by nearly 200 billion won from early Dec., and exchange-traded derivatives margin deposits reached 1.67086 trillion won, approaching the November record high.
However, the securities industry emphasizes that attention should be paid to the pace ahead rather than whether rates are cut. For that reason, changes in the "dot plot," which shows FOMC Commissioners' outlook for the policy rate, are cited as the market's key focal point.
Han Ji-young, a researcher at Kiwoom Securities, said, "A December rate cut has already been priced into the market," adding, "How the median policy rate for 2026 (3.4%) presented at the September FOMC is adjusted this time will determine the future course of the stock market."