'Debt Investment' Scale Hits Another Record High... Approaching 13 Trillion Won

12.8674 Trillion KRW on the 8th... 40% Increase Since the Beginning of the Year
Impact of Soaring Stock Trading Volume... Up 146% Compared to Early Year

Photo by Getty Images Bank

[Asia Economy Reporter Minwoo Lee] The scale of "debt investment"?borrowing money to invest in stocks?has approached 13 trillion won. Analysts attribute this not only to an increase in speculative investors willing to take risks but also to the overall rise in stock market trading volume as more people jump into the market.

According to the Korea Financial Investment Association on the 10th, as of the 8th, the outstanding balance of margin loans (money borrowed from securities firms by investors to buy stocks) in the KOSPI and KOSDAQ markets totaled 12.8574 trillion won. This surpassed the record high of 12.6705 trillion won set just a week earlier on the 2nd. Compared to 9.2072 trillion won at the beginning of the year, this represents a 39.8% increase.

The outstanding balance of margin loans fell to 6.4075 trillion won in late March when the domestic stock market plummeted due to the COVID-19 pandemic but began to rise again afterward. This was because investors who judged the stock prices to be at their lowest point rapidly flocked in, increasing buying pressure. The balance continued to rise sharply, surpassing 12 trillion won for the first time in two years since June 2018 on the 15th of last month. Since then, it has increased by nearly 1 trillion won in about three weeks, bringing it close to breaking the 13 trillion won mark for the first time ever.

Typically, an increase in margin loan balances is interpreted as a sign that more investors are taking on risk. However, recent analysis suggests that the surge in overall stock market trading volume is the main cause. According to the Korea Exchange, the cumulative trading volume in the stock market reached 2,402.1437 trillion won as of the 9th this year, already surpassing last year's annual trading volume of 2,288.2182 trillion won. Daily trading volume has also increased rapidly. The trading volume in the KOSPI and KOSDAQ markets rose 146% from 9.1147 trillion won on January 2nd to 22.4177 trillion won on the 9th of this month. Meanwhile, the margin loan balance in the two markets increased by 39.6% from 9.2072 trillion won during the same period. This means the proportion of "debt investment" has actually decreased.

Nevertheless, since the absolute scale of debt investment continues to grow steadily, experts warn that investors should exercise particular caution. Unlike the base interest rate, which has dropped to 0.5%, the margin loan interest rate remains high at around 8-9% annually, so if investors fail to generate profits to repay their debts, interest burdens could increase sharply. A financial investment industry official said, "Margin loan business is highly profitable for securities firms but also carries greater risks compared to existing businesses, which adds pressure on securities firms as well," and added, "Since the stock market cannot remain bullish indefinitely, investors should be especially careful."

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