Ants' "Borrowed Money for Stocks" Exceeds 20 Trillion Won

[Asia Economy Reporter Koh Hyung-kwang] Office worker Mr. A (43 years old) bought a total of 40 million won worth of battery-related stocks last month by adding a securities firm's "margin trading loan" (hereafter margin trading) to the 30 million won he had. Margin trading refers to investors borrowing additional funds from securities firms using their principal as collateral to invest in stocks. Recently, as the index rose sharply, Mr. A has enjoyed decent profits through leverage effects, making watching the stock market quite enjoyable. Despite a friend's warning that a forced sale of stocks by the securities firm, called a "forced liquidation," could cause significant losses if stock prices fall, he pays no attention. He said, "The securities firm says the KOSPI will rise to 3,500, so why worry?" and added, "I plan to increase margin trading further whenever I get the chance."

The amount of money borrowed from securities firms for stock investment, like Mr. A, has surpassed 20 trillion won for the first time ever. This appears to be due to individual investors actively engaging in leveraged investing as the domestic stock market continuously hits new highs and surpasses the 3,100 mark.

According to the Korea Financial Investment Association on the 11th, as of the 7th, the margin trading balance reached 20.1222 trillion won, breaking the 20 trillion won barrier for the first time in history. The margin trading balance, which was around 19.22 trillion won at the end of last year, increased by 900 billion won in just four trading days recently.

By market, the KOSPI market recorded 10.1319 trillion won, and the KOSDAQ market 9.9903 trillion won, with both markets hitting around 10 trillion won in margin trading balances for the first time ever. Margin trading is typically concentrated in the KOSDAQ, where short-term trading is common, but since November last year, the KOSPI balance has surpassed the KOSDAQ, showing expansion into the KOSPI as well.

At the beginning of last year, the margin trading balance was maintained at around 9 to 10 trillion won but dropped sharply to about 6.4 trillion won in March last year with the onset of the COVID-19 pandemic and the stock market plunge. However, after the market began to rebound, margin trading started to increase rapidly. By the end of June last year, it reached the 12 trillion won level, nearly doubling in about three months, then exceeded 14 trillion won and 15 trillion won in July and August respectively, and surpassed 17 trillion won in September.

Following warnings and concerns from financial authorities about excessive leveraged investing, the balance fell to the 16 trillion won level in early September last year and remained largely unchanged until early November. However, with the market's upward trend, it quickly recovered to the 17 trillion won level, then surpassed 18 trillion won for the first time last month, and recently crossed 19 trillion won and 20 trillion won consecutively within a month.

As the scale of margin trading has recently increased rapidly, there are many voices of concern in the market. Hwang Se-woon, a research fellow at the Capital Market Research Institute, said, "It is true that the continuously inflowing market liquidity acts as a factor maintaining optimistic stock market forecasts," but he also pointed out, "Margin trading balances, which remain at high levels, are a factor that can increase loss risks by triggering massive forced liquidations if market volatility expands due to a future downturn, so careful caution is required."

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