Debt-Financed Buying of Samsung Electronics Stocks by the Advancing Ants... "Betting on a Bull Market"

[Asia Economy Reporter Lee Seon-ae] Samsung Electronics' margin loan balance has surged. It appears that individual investors are concentrating their so-called 'debt investing'?borrowing money to invest in stocks?on Samsung Electronics.

According to the Korea Exchange on the 22nd, as of the 18th (based on trading date), Samsung Electronics' margin loan balance stood at 13.51 million shares (941.8 billion KRW). This is about a 32% increase from 1.24 million shares (723.9 billion KRW) on the 30th of last month.

Looking at trading trends, during the period from the 5th to the 13th, when Samsung Electronics' stock price either declined or closed flat, the margin loan balance actually increased. In particular, on the 13th, when the stock price plunged 3.38%, the balance rose by about 1.95 million shares (17%) compared to the previous day.

Conversely, on days when the stock price rose, the margin loan balance generally decreased. From the 2nd to the 4th, when the stock price recovered to the '80,000 Electronics' level, the margin loan balance declined for three consecutive days. Even on the 17th, when the price intraday rose up to 0.94% suggesting a rebound, the balance decreased.

This is analyzed to be closely related to individual trading behavior. Since the COVID-19 pandemic last year, individuals have tended to buy more when the index falls and sell more when the index rises.

Kim Young-hwan, head of the Investment Strategy Team at NH Investment & Securities, said, "The reason the stock price is falling now is due to foreign investors selling, and the buyers of these stocks are individuals. Since individuals also use margin trading when buying stocks, this tendency exists."

He explained that as individuals engage not only in long-term investment but also in profit-taking from short-term rebounds in stock prices, the margin loan balance moves accordingly.

In fact, according to the Korea Financial Investment Association, during the six consecutive trading days of KOSPI decline from the 9th to the 17th, the margin loan balance increased daily, surpassing 25 trillion KRW for the first time on the 13th. Considering that margin loan balances usually increase when stock prices are expected to rise, it seems that there is also a perception that the current price decline is excessive.

The securities industry expects that as the base interest rate rises, overall costs will increase, and the interest rate hike will partially influence the direction of margin loan interest rates. This could increase the interest burden on individuals.

However, there is also analysis that the base rate hike will not change the overall trend of 'debt investing.'

Team leader Kim Young-hwan said, "Interest rates affect investment when (funding costs increase) expected returns are lowered, or when rates are raised to cool an overheated economy, lowering asset price outlooks, but neither is the case now," adding, "Since securities firms' margin loans usually have high interest rates, the impact of a base rate hike is even less."

Researcher Kim Kwang-hyun of Yuanta Securities said, "While it cannot be said there is no impact, since the rate is rising from a very low level, even if it increases, the absolute level is not high," and added, "Unless expectations form that 'rate hikes are a trend,' I want to approach conservatively whether a single rate hike will have a significant impact on the stock market or margin loan balances."

It is predicted that a sharp stock price drop will have a more direct impact than the base rate hike itself. When confidence in a rise is shaken, individuals may hesitate to engage in active buying such as 'debt investing.'

Additionally, if the stock price falls and the collateral maintenance ratio for margin trading falls below the standard, forced liquidation occurs, which can act as selling pressure on the margin loan balance volume.

Researcher Moon Jong-jin of Kyobo Securities analyzed, "(Individuals) withdraw a lot of funds when the index falls below a certain level," and said, "(Currently) it seems okay because individuals buy whenever the stock price falls, but there is a 'hurdle.' Personally, I see it at 2,980 points on the KOSPI, which was the level when individuals bought a lot last January."

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