100 Trillion Won, Money Invested by Retail Investors This Year

Net Purchase of Domestic Stocks 56 Trillion Won, Overseas 16 Trillion Won
Investor Deposits Increase by 29 Trillion Won

Margin Loans Also Surpass 17 Trillion Won
Growing Concerns Over Individual Financial Soundness

[Asia Economy Reporter Koo Eun-mo] It is estimated that nearly 100 trillion won of funds from individual investors have poured into domestic and overseas stock markets since the beginning of this year. Amid this, the balance of margin loans has also surpassed 17 trillion won, continuously hitting record highs, raising concerns about the financial soundness of individual investors.

According to the Korea Exchange on the 17th, individual investors have net purchased 43.5564 trillion won in the KOSPI market and 12.3764 trillion won in the KOSDAQ market up to the previous day this year. Combined, they bought stocks worth a total of 55.9327 trillion won in the two markets.

Investor deposits, which are standby funds that can be invested in the stock market at any time, have also increased significantly. According to the Korea Financial Investment Association, as of the 15th, investor deposits stood at 56.6921 trillion won, an increase of 29.2988 trillion won from the end of last year (27.3933 trillion won). This means that the amount of money investors entrusted to securities firms for stock purchases or money not withdrawn after selling stocks increased by about 30 trillion won compared to the end of last year.

Since the outbreak of the novel coronavirus disease (COVID-19), individual investors, who emerged as the main force of the so-called 'Donghak Ant Movement' and the leading players in the stock market, have recently expanded their investment scope beyond domestic stocks to overseas stocks.

According to the Securities Information Portal (SEIBro) of the Korea Securities Depository, net purchases of overseas stocks amounted to 13.57 billion dollars (approximately 16 trillion won) as of the 14th of this year. The overseas stock net purchase amount, which showed a gradual increase from 1.45 billion dollars in 2017 to 1.57 billion dollars in 2018 and 2.51 billion dollars last year, surged sharply this year, indicating that individual investors' interest in the stock market has expanded to overseas markets as well.

Simply adding the net purchase amount of stocks by individual investors this year, the increase in investor deposits, and the net purchase amount of overseas stocks exceeds 100 trillion won. Although the increase in deposits and overseas stock net purchases include shares of domestic institutional investors, considering the significant expansion of individual investors' fund inflows, it can be estimated that individuals have poured nearly 100 trillion won into domestic and overseas stocks since the beginning of this year.

While nearly 100 trillion won of individual investors' funds have flooded the market, margin loans are also continuously hitting record highs. According to the Korea Financial Investment Association, as of the 15th, margin loans increased by 120.7 billion won from the previous trading day to 17.5684 trillion won. This is the highest level since data collection began in 1998. However, as 'debt investing' (borrowing to invest in stocks) has surged recently, securities firms concerned about capital soundness have successively suspended credit extensions. Concerns about individuals' financial soundness have also grown.

Voices warning about stock market overvaluation due to liquidity expansion are also increasing inside and outside the financial market. Lee Chang-yong, Director for Asia and the Pacific at the International Monetary Fund (IMF), said at an online conference hosted by the Korea Capital Market Institute on the 16th, "The financial market is currently optimistic, expecting vaccines or treatments to be available by the end of the year," adding, "Stock market prices are better than expected, so there is said to be a mismatch between the real economy and finance." He further pointed out, "It would be good if vaccine development is completed by the end of the year, but if it is delayed, the market may be disappointed, and asset prices could be significantly adjusted."

A securities industry official said, "With a lot of liquidity flowing into the stock market, stock prices are often excessively high compared to corporate earnings," adding, "During a stock price correction period, investors who borrowed to invest are primarily exposed to risks, so conservative risk management is necessary."

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