The Bank of Korea (BOK) said on the 5th that the recent sharp rise in stock prices was affected to some extent by individuals' "investing with debt" (borrowing to invest).
The Bank of Korea (BOK) said in a written response submitted to the office of Park Sung-hoon of the People Power Party that "the recent rise in stock prices is based on solid fundamentals, such as strong earnings centered on semiconductors by corporations, but the increase in individuals' leveraged investing, including margin financing, also appears to have had some impact."
According to the Korea Financial Investment Association, as of the 2nd of this month, the margin financing balance stood at 37.7187 trillion won. The margin financing balance is the amount investors borrowed from securities firms to buy stocks that has not yet been repaid. This balance increased by 400 billion won in the past two days.
Bank loans are also on the rise. As of the 2nd of this month, the outstanding loan balance of commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) for unsecured credit loans was 109.1648 trillion won. That is up 494.4 billion won from the end of the previous month (108.6704 trillion won).
The Bank of Korea (BOK) said, "If stock prices undergo a sharp correction amid an increase in investing with debt and leverage ETFs tied to single stocks (Samsung Electronics, SK hynix), individual investors' losses will grow." It added, "Forced selling and increased redemptions could amplify stock price volatility, which could in turn lead to losses for other investors, so caution is warranted."