The Bank of Korea said on the 24th that money domestic investors borrowed from securities firms to trade stocks totaled 39.4 trillion won as of the end of May, the most since related statistics began. As the KOSPI kept hitting a record high and at one point topped 9,300 points, more people borrowed to invest. The Bank of Korea warned, "Given the increase in stock purchases using leverage, individual investors' losses could grow if prices correct."
According to the Bank of Korea's Financial Stability Report for the first half of 2026 released that day, margin loans and failed settlements stood at 39.4 trillion won as of the end of May, double the level a year earlier (19.2 trillion won). Margin loans and failed settlements are a type of leverage transaction in which investors buy stocks with money borrowed from securities firms.
The scale of so-called "debt-fueled investing" is estimated to be even larger than that. That is because some investors buy stocks with loans from deposits institutions such as banks rather than securities firms. In fact, other loans (unsecured loans, overdraft loans, stock-collateral loans, etc.) increased by 4.8 trillion won in the first quarter. That is on par with the full-year increase last year (5.8 trillion won). The Bank of Korea noted, "A significant portion of household other loans, whose increase widened since the fourth quarter of last year, may also have flowed into the stock market."
◇ Forced deleveraging this year alone totals 2 trillion won
Investing in leveraged exchange-traded funds (ETF), where gains and losses double when asset prices rise or fall, has also expanded. The leveraged ETF net worth aggregates totaled 35.4 trillion won at the end of May, 2.73 times more than a year earlier (9.5 trillion won).
The Bank of Korea expressed concern that leveraged investors could suffer heavy losses if stock prices correct. When stock prices fall beyond a certain level, securities firms forcibly sell (margin calls) the stocks investors hold to recover the money they lent. When selling pressure hits the market, prices can drop further, triggering more forced sales in a vicious cycle. The Bank of Korea's analysis showed that when the KOSPI fell 5% from the previous transaction day, the scale of forced sales increased sharply.
Forced sales have in fact been occurring frequently. The transaction amount of forced sales totaled 1.9433 trillion won in January–May this year, 2.5 times the level in the same period a year earlier (559.9 billion won). By month, May was the highest among disclosed statistics at 684.6 billion won. The Bank of Korea said, "Borrowed products for stock purchases act to widen price swings through discretionary stock disposals, and leveraged ETFs through increased redemptions."
Even as a debt-investing frenzy rages, more people are failing to repay loans for long periods. Among vulnerable borrowers who took out loans from three or more financial institutions but are low income and low credit, the share of long-term delinquents was 8% in the first quarter, the highest since 2015. Loans taken to endure the COVID period have come back like a boomerang.
If the Bank of Korea raises the policy rate and tightens liquidity, the lending rate on these borrowers' loans will rise as well, increasing the risk of defaults. The Bank of Korea said, "If loan deterioration is not sufficiently reduced, and if improvements in repayment capacity are delayed or lending rates rise, arrears could increase and remain elevated." Earlier, Bank of Korea Governor Shin Hyun-song said that concerns that rate hikes could increase interest repayment burdens on vulnerable groups should be addressed through fiscal policy.