19.34 Trillion Won... Record High 'Debt Investment'

[Asia Economy Reporter Koh Hyung-kwang] As the stock market continues to hit record highs day after day, the scale of individual investors' "debt investment (borrowing to invest in stocks)" has also surpassed the historic high of 19 trillion won.

According to the Korea Financial Investment Association on the 30th, as of the 28th, the outstanding balance of credit loans in the domestic stock market reached 19.34 trillion won, more than double compared to the beginning of the year (9.2072 trillion won). Since it first exceeded 18 trillion won on the 1st, it has shown a steady increasing trend. By market, the KOSPI market recorded 9.7187 trillion won, and the KOSDAQ market 9.6213 trillion won, with both markets surpassing 9 trillion won in outstanding credit loans for the first time this month.

The outstanding balance of credit loans is the cumulative amount borrowed by individuals from securities firms to purchase stocks and serves as a kind of lagging indicator following the index's strength. It is interpreted as meaning that individuals are borrowing to invest based on the expectation that "it will rise further." Typically, credit loan balances are concentrated mainly in KOSDAQ, where short-term trading is frequent. However, since September, the KOSPI balance has also surpassed the historic high of 8 trillion won, showing an expansion of credit loan balances from KOSDAQ to KOSPI.

Credit loan balances, which had maintained a level of 9 to 10 trillion won since the beginning of this year, sharply dropped to around 6.4 trillion won in March when the COVID-19 pandemic fully unfolded and the stock market plunged. However, after the stock market began to rebound, credit loan balances rapidly increased. By the end of June, it reached the 12 trillion won level, nearly doubling in three months, then exceeded 14 trillion won and 15 trillion won in July and August respectively, and even surpassed 17 trillion won in September. Subsequently, as financial authorities issued warnings and concerns about excessive debt investment continued, it fell back to the 16 trillion won level but then rose again to the 17 trillion won level with the stock market's upward trend, surpassing 18 trillion won earlier this month and even exceeding 19 trillion won on the 14th.

The increase in credit loan balances is a phenomenon caused by the rapid rise in individual investors entering the stock market this year, but it is pointed out as a risk factor because it can create a bubble in the stock market. However, debt investment is not a problem limited to South Korea. In the United States, the largest stock market, debt investment is also rapidly increasing. The Wall Street Journal (WSJ) reported on the 27th (local time), citing data from the Financial Industry Regulatory Authority (FINRA), that the margin debt balance in the U.S. stock market last month reached $722.1 billion (approximately 788.5332 trillion won), a 9.6% increase from the previous month ($659.3 billion), setting a record high in two and a half years. The previous record was $668.9 billion (730.4388 trillion won) in May 2018.

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