[Deputy Manager Column] Securities Firms Encouraging 'Bitt' (Debt Investment)

[Asia Economy Reporter Koh Hyung-kwang] 2.8825 trillion won. This is the amount of money individual investors, so-called 'Gaemi,' have recently borrowed from securities firms for stock investments in the past month. Considering this excludes personal credit loans or mortgage loans, the amount is quite large. While the 'Donghak Gaemi Movement' frenzy likely led to massive purchases of blue-chip stocks including Samsung Electronics, a significant portion of the funds appears to have been speculative money aiming for a 'big hit' in the rollercoaster market following the spread of the novel coronavirus infection (COVID-19).

The amount borrowed using stocks as collateral increased by 41.5 billion won (from 154.202 trillion won to 154.617 trillion won), and unsettled transactions rose by 33.9 billion won (from 2.145 trillion won to 2.484 trillion won). The credit loan balance surged by a whopping 2.8071 trillion won (from 66.888 trillion won to 94.959 trillion won). Credit loans refer to borrowing money from securities firms using cash or stocks as collateral. Investments using these loans are generally safe if stock prices steadily rise. The problem arises in the opposite case. If prices fall below a certain level, securities firms initiate forced sales. When stock prices plummet and investors cannot repay their debts, securities firms step in to forcibly sell stocks to recover the loans. This results in enormous losses for investors.

When the KOSPI index plunged 25.8% (505 points) in mid-March, the credit balance, which was over 10 trillion won, sharply decreased by 2.6 trillion won within a week due to large-scale forced sales. At that time, so-called 'empty accounts' that could not repay borrowed money even after selling all stocks appeared in large numbers.

In this situation, several domestic securities firms have extended the hours for stock-collateralized loans, drawing sharp criticism. They expanded the loan hours, which were usually allowed only during business hours, to as late as 10 PM to midnight. Securities firms explained this as a "measure for customer convenience." However, this is a cunning move to increase loans during the COVID-19-driven 'peak season' and earn higher interest income of 7-9% annually. It effectively encourages Gaemi's 'debt investment' (borrowing to invest).

Financial companies' nighttime loan facilitation raises suspicions of illegal lending businesses beyond just promoting debt investment. This comes at a time when financial authorities are repeatedly issuing warnings that "investment is the individual's responsibility" amid the recent buying frenzy by individuals. Why have regulated financial firms jumped into this vicious cycle of 'debt investment → stock price decline → empty accounts → credit delinquents,' even at the risk of public backlash? Is it just to earn a few more interest points? Or is it truly for the convenience of customers?

This content was produced with the assistance of AI translation services.