Ahead of the U.S. Federal Reserve's Federal Open Market Committee (FOMC) decision to cut interest rates, "debt-fueled investing" is hitting a record high in Korea's stock market day after day.
According to the Korea Financial Investment Association on the 10th, as of the 8th, the balance of margin loans (credit offerings) stood at 2.73554 trillion won, setting an all-time high.
A margin loan is when an individual borrows money from a brokerage to buy stocks, and the surge in balances 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 fanning debt-fueled investing.
Kang So-hyun, senior research fellow at the Capital Market Institute, said it reflects the psychology that even by taking on debt, if the stock market rises, one can earn returns that far exceed the interest expense.
The fear of missing out (FOMO) phenomenon is also analyzed to be stoking debt-fueled investing. The KOSPI, which was trading at the 2,300 level in April, continued a rally from May and quickly broke above the 4,200 level at the end of October. As the index rebounded in December, rising about 5.69%, investors who failed to post revenue during the upswing were thought to be influenced by the psychology of "getting on board even if it's the last train."
Cash on the sidelines targeting entry after the FOMC is also increasing rapidly. On the 8th, investor deposits stood at 7.93859 trillion won, up by nearly 200 billion won from early December, and exchange-traded derivatives margin deposits reached 1.67086 trillion won, approaching November's record high.
However, the securities industry emphasizes that attention should be paid to the pace going forward rather than whether rates are cut. For this reason, changes in the "dot plot," which shows FOMC Commissioners' outlook for the policy rate, are cited as the key focus for the market.
Han Ji-young, a researcher at Kiwoom Securities, said, "A December rate cut is already priced in," adding, "How the median policy rate for 2026 (3.4%) presented at the September FOMC is adjusted this time will determine the course of the stock market ahead."