As the domestic stock market extends its strength, margin loan balances are hitting a record high day after day. This balance refers to the amount investors borrowed from securities firms to buy stocks and have not yet repaid. The so-called "debt investing," where investors borrow to bet on rising share prices, appears to be growing rapidly.
According to the Korea Financial Investment Association on the 28th, margin loan balances at securities firms totaled 3.23684 trillion won as of the 26th. After topping 3 trillion won for the first time on the 29th of last month, the figure rose by more than 200 billion won in less than a month. Compared with 2.72864 trillion won at the end of last year, it has increased about 20% so far this year.
By market, growth in the Korea Exchange main board (KOSPI) stood out. KOSPI margin loan balances rose about 25% from 2.11260 trillion won at the end of last year to 2.14867 trillion won. The KOSDAQ market increased only about 7%, from 1.01603 trillion won to 1.08716 trillion won over the same period.
Margin financing typically increases as expectations for stock price gains grow. The recent surge is seen as the result of the KOSPI breaking above 6,000 for the first time and setting a record high day after day. The KOSPI has jumped about 50% from the end of last year.
Margin loans can leverage debt to seek high returns, but because stocks are pledged as collateral for the loans, a decline in share prices can trigger forced liquidation (margin calls) due to insufficient collateral value, causing large losses.
Funds flowing into the stock market are also rising quickly. Investor deposits stood at 119 trillion won as of the 26th, on the verge of topping 120 trillion won for the first time. Investor deposits are idle funds parked in investors' accounts at securities firms, and after surpassing 100 trillion won for the first time on the 27th of last month, they increased about 20% in a month. In just this week, an additional 1.5 trillion won flowed in.
The exchange-traded fund (ETF) market is also bulking up. As of the 27th, ETF net worth aggregates stood at 387 trillion won, nearing the 400 trillion won mark. After exceeding 300 trillion won at the start of the year, it grew by more than 40 trillion won this month alone, and by 21 trillion won over the past week.