As the Korea Composite Stock Price Index (KOSPI) surged sharply, so-called "debt-fueled investing," or "bit-too," jumped, turning the financial sector's outstanding loan balance of unsecured loans back to growth for the first time in six months. Since the start of this month, the increase in individuals' unsecured outstanding loan balance has neared 1 trillion won in just three days.
According to the financial sector on the 7th, last month the overall financial sector's outstanding loan balance of unsecured loans returned to growth for the first time since November last year. Unsecured loans in the financial sector increased by 1 trillion won in November last year, then fell by 2.5 trillion won in December. After that, this year it continued to decline for five consecutive months through ▲ January (-1.1 trillion won) ▲ February (-1 trillion won) ▲ March (-200 billion won) ▲ April (-800 billion won).
However, as the KOSPI broke through the 8,000 level last month, demand for bit-too surged and grew rapidly, led by the banking sector. At the end of last month, the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) had an individuals' unsecured outstanding loan balance of 104.9 trillion won, up 2.1 trillion won from the previous month's end (102.8 trillion won).
The growth in unsecured loans is continuing this month as well. As of the 4th, the individuals' unsecured outstanding loan balance at the five major banks increased by 989.4 billion won from the previous month's end. The increase neared 1 trillion won in just three trading days.
The margin lending balance, a representative bit-too indicator, surpassed 38 trillion won for the first time ever on the 29th of last month. It has edged down since, but stood at 37.74 trillion won as of the 4th, maintaining a high level. Margin lending is money that investors borrow from securities firms to buy stocks.
In the meantime, the financial authorities have pursued policies to revitalize the stock market under a stance of channeling funds concentrated in the real estate market into the capital market. As bit-too led to a surge in unsecured loans during this process, they moved to seek management measures.
However, for now, it is understood to be difficult for the authorities to impose additional regulations. During the June 27 measures last year, the government limited the loan limit for unsecured loans to within 100% of a borrower's annual income to prevent home purchases using unsecured loans.
On top of that, with the implementation of the three-step stress debt service ratio (DSR), at least a 1.5% additional interest spread is also being imposed. The stress DSR is a system that calculates the loan limit by adding a spread (stress rate) to the loan interest rate to reflect the risk of future interest rate changes. When the stress rate is applied, the loan limit is reduced accordingly.
High interest rates are also hindering additional regulation. On the 5th, the three-year Treasury yield in the Seoul bond market closed at an annual 3.882%, up 2.4 basis points (1 bp = 0.01 percentage point) from the previous trading day, the highest level in about 2 years and 7 months.
The financial authorities are cracking down on overheating factors that could stoke bit-too demand. As single-stock leveraged exchange-traded funds (ETFs) for Samsung Electronics and SK hynix recently showed signs of overheating, the Financial Services Commission convened securities industry officials on the 5th for a review meeting.
The Financial Supervisory Service also launched an inspection of Mirae Asset Securities, which sold subscriptions for SpaceX's initial public offering, to crack down on potential misselling and false or exaggerated advertising.