As the domestic stock market repeatedly surged and plunged due to the Iran situation, the financial authorities issued a warning against "bit-too (borrowing to invest)." The Financial Supervisory Service said on the 9th that it held an emergency meeting presided over by First Senior Deputy Governor Lee Se-hoon and decided to closely examine the flow of so-called "bit-too (borrowing to invest)" funds, including margin financing and credit line loans.
However, some noted that there is a wide gap in the temperature of the policy messages coming from the financial authorities. During the market's rally since the start of the year, the authorities rolled out policies that actively drew individual investors' funds into stocks, such as allowing the launch of single-stock leveraged exchange-traded funds (ETFs).
On the 9th, the KOSPI fell 5.96% from the previous trading day to close at 5,251.87. After hitting a record high of 6,307.27 on the 26th of last month, the index plunged about 17% in just six trading days. The KOSDAQ also dropped more than 7% over the same period, falling back from just below the 1,200 level.
A large number of individual investors who flocked to the stock market since last year are expected to post losses. Early in the year, the domestic market showed an unusual strength on the back of an improvement in the semiconductor cycle and the government's market-boosting policies, and household funds poured into stocks.
In January–February this year alone, individual funds and financial investment flows that capture individuals' ETF investments totaled more than 24 trillion won. Compared with foreigners' net selling of 20.9546 trillion won over the same period, individual money effectively led the rise in the domestic market.
In particular, the government expanded access to leveraged investing by allowing the launch of single-stock leveraged ETFs and also pushed to introduce the return-to-domestic-market account (RIA) system to encourage the return of "Korean retail investors trading U.S. stocks" to the domestic market.
However, as Middle East geopolitical risks surfaced, market sentiment reversed sharply. Along with a spike in international oil prices, stocks plunged, and the won-dollar exchange rate at one point topped 1,500 won, amplifying market volatility.
As conditions shifted rapidly, the financial authorities held an emergency financial market review meeting that day and decided to strengthen monitoring of the flow of "bit-too" funds such as margin financing and credit line loans. President Lee Jae-myung said at an emergency economic review meeting that day, "If necessary, we will actively expand the market stabilization program to 100 trillion won," directing the government and the Central Bank to preemptively prepare additional measures.
A person at an asset management firm said, "Because the Iran situation, which triggered the recent market crash, is an external factor that the government can hardly predict, it is difficult to blame the government for individuals' investment losses," but added, "That said, when the market was rising, the authorities kept sending messages encouraging stock investing, and once prices fell, they emphasized investment risks, which inevitably creates confusion for individual investors."
In November last year, at the start of the market's rally, Financial Services Commission Vice Chairman Kwon Dae-young said, "Bit-too is also a type of leverage," drawing criticism from opposition lawmakers that the remark encouraged stock investing.
Among individual investors, reactions vary, including, "When prices rise, they say it's thanks to government policy, but when they fall, they blame bit-too," and, "Concentrating all personal funds in a 'molppang (concentrated bet)' or borrowing to invest is one's own responsibility."