Stock Market Daily Trading Volume Hits 18 Trillion Won 'Record High'... Where Did This Massive Capital Come From?

Speculative Buying Concentrated in Leverage and Inverse Stocks
Possibility of Gambling Funds Inflow in Casinos and Horse Racing
"Massive Liquidity Released into the Market Is the Biggest Impact"

[Asia Economy Reporter Minwoo Lee] As the trading volume in the domestic stock market has surged to an unprecedented level, various interpretations about the source of funds are emerging. Some suggest that gambling funds flowed in as horse racing tracks and casinos closed due to concerns over the spread of the novel coronavirus (COVID-19), while others claim that surplus funds from real estate regulations have poured in. However, experts generally analyze that cash previously tied up in individual accounts has flowed in due to the liquidity released into the market.

According to the Korea Exchange on the 18th, the average daily trading volume of the KOSPI and KOSDAQ markets until June this year was 18.028 trillion won, nearly double last year's 9.3 trillion won. The balance of credit loans, which refers to borrowing money from securities firms to invest in stocks, also exceeded 12 trillion won, marking the highest level this year. It is the first time since June 2018 that it has surpassed 12 trillion won. Interest in stock investment among individual investors has grown so much that it is called the "Donghak Ant Movement."

In particular, individual investors' buying frenzy concentrated on leveraged or inverse products that track twice the index, reminiscent of a "gambling table." From March 19, when the KOSPI hit its yearly low, until the day before, the most purchased stock by individual investors was KODEX 200 Futures Inverse 2X. They net bought a total of 2.6793 trillion won, about 700 billion won more than Samsung Electronics (1.9944 trillion won), the leading stock in the domestic market. This product, known as "Gopbus" (a combination of "multiply" and "inverse"), tracks twice the daily decline rate of the KOSPI 200 futures index. The "KODEX WTI Crude Oil Futures (H)," which sparked a speculative frenzy in crude oil, ranked third with 1.0128 trillion won. This amount is about twice that of Celltrion Healthcare (570 billion won) and SK (537 billion won), which ranked fourth and fifth, respectively.

As such speculative investments flourished, some speculated that funds from gambling industries such as horse racing, casinos, and Sports Toto might have flowed into the stock market. Since these businesses have been temporarily closed due to COVID-19, it is analyzed that funds with nowhere else to go have flowed into the stock market. The Korea Racing Authority closed all its nationwide facilities, including the Gwacheon Racecourse, from February 23. Although it recorded sales of 7.2572 trillion won last year, it has been closed for three months, and sales losses are expected to approach 2 trillion won. For the first time in its 71-year history, there are concerns about operating deficits. Accordingly, horse racing will resume without spectators starting on the 19th.

The situation is similar for casinos. Kangwon Land has been closed since February 23 and has yet to set a reopening date. If it does not reopen in June, the closure period will extend to 129 days. Considering Kangwon Land's disclosed average daily sales loss of 3.7 billion won in the first quarter, losses could reach about 480 billion won in the first half of the year. Sports Toto, which recorded sales of 4.8 trillion won last year, also suspended operations for more than two months as major sports leagues worldwide were completely halted. Recently, as games have resumed, the situation is gradually improving. A securities industry official said, "Even middle-aged and older people with no investment experience have recently entered the market significantly," adding, "It is highly likely that some gambling funds, which were virtually halted due to COVID-19, have also flowed in."

However, many analyses suggest that the proportion of such gambling funds in the newly inflowing stock market funds is not large. The biggest influence is the liquidity expansion phase, where governments worldwide lowered interest rates and injected funds, rather than direct effects from gambling funds. Hwang Sewoon, a research fellow at the Korea Capital Market Institute, said, "While there is a possibility of gambling funds flowing in, it is unlikely to be at a meaningful level," pointing out that "the characteristics of market participants differ, and the boundary between the stock market and gambling markets is clear." He added, "The massive liquidity released domestically and internationally had the greatest impact," explaining, "Funds previously held in Comprehensive Asset Management Accounts (CMA) or Money Market Funds (MMF) due to the low-interest-rate trend were all injected into the stock market, which is the most important factor."

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