The heat in Korea's stock market, which had overheated with "bit-too" ("investing with borrowed money") right after the outbreak of war between the United States and Iran, is cooling quickly. As concerns grow that the war could drag on and the KOSPI is stuck in a 5,000-point box range, risk appetite among individual investors who used leverage in hopes of high returns appears to have shrunk sharply.
According to the Korea Financial Investment Association on the 17th, investors' deposits, which are individual investors' idle funds, fell about 10 trillion won (7.7%) from 12.99574 trillion won on the 6th to 11.99696 trillion won on the 13th.
The market's "bit-too" indicator is also clearly slowing. Over the same period, margin loan balances decreased 3% to 11.9 trillion won, and receivables from consignment trading plunged 47% to about 1 trillion won. As the Iran war has entered a prolonged phase and the KOSPI has been stuck in a 5,000-point box range, the fervor for leveraged investing—buying stocks with securities firm loans or on credit—has cooled rapidly.
Ko Yeon-su, a researcher at Hana Securities, said, "At present, compared with the outbreak of the war, index volatility is not large and the market is holding flat, so (receivables from consignment trading) have decreased."
Tighter leverage controls by the government and securities firms are also seen as contributing to the decline in "bit-too." As the scale of borrowing to invest approached an all-time high, Korea Investment & Securities Co. and NH Investment & Securities halted new transactions for margin loans and securities lending for margin trading. The Financial Supervisory Service also met with executives in charge of margin financing at 11 securities firms to review risk systems.
Ko added, "As the government and securities firms move to reduce outstanding credit offerings, the fervor for leveraged investing may have cooled as well."
This contrasts with the flow right after the war, when rising volatility brought a rapid influx of funds. When the KOSPI plunged for two straight days on the 4th and 5th, investors' deposits increased to 13 trillion won and 13 trillion won, respectively, reaching record-high levels, and margin loans and receivables also surged to 3.36945 trillion won and 214.87 billion won, respectively.
The risk of forced liquidation, which had been cited as the market's detonator, is also gradually easing. On the 6th, right after the war, the scale of forced liquidation of receivables was 82.421 billion won, the highest since Oct. 2023, but it has been falling quickly in recent days. The ratio of forced liquidation to receivables also soared to 6.5% and 3.8% on the 5th and 6th, respectively, but fell sharply to 1.3% on the 13th, a week later.
Still, experts say the market's fundamentals remain solid despite this outflow of funds. Kim Doo-eon, a researcher at Hana Securities, said, "Although deposits have decreased, they still remain around 12 trillion won," and noted, "Individual investors are maintaining net buying even as foreigners continue net selling."