Despite KOSPI Plunge, Retail Investors Increase 'Chongal'... Investor Deposits Surpass 70 Trillion Won

Surpassing 70 Trillion Won Again in a Month... 'Debt Investment' Decreases by 1.1 Trillion Won
"Considered a Temporary Adjustment Due to Uncertainty... Seen as a Buying Opportunity at the Low Point"

[Asia Economy Reporter Minwoo Lee] Despite the sharp decline in the domestic stock market, investor deposits, which serve as standby funds for the stock market, have surpassed 70 trillion won again after about a month. Given that fundamentals such as corporate earnings remain solid, it is interpreted that investors are aiming to buy at the bottom even in an excessively falling market.

According to the Korea Financial Investment Association on the 7th, as of the 5th, investor deposits (excluding margin deposits for on-exchange derivatives trading) recorded 70.8794 trillion won. After recording 70.4114 trillion won on the 13th of last month, the amount temporarily dropped to the 65 trillion won range but is now showing a trend of inflow again.

During the same period, the scale of ‘debt investment’?borrowing money from securities firms to invest?has steadily decreased. According to the Korea Financial Investment Association, as of the 5th, the balance of credit transactions was 24.4807 trillion won. After exceeding 25.6 trillion won again about a month ago on the 13th of last month with 25.654 trillion won, it has decreased for 12 consecutive trading days. It has decreased by 1.1733 trillion won during this period.

The ratio of forced sales compared to unpaid entrusted trading balances, which had surged to the 9% range for the first time since mid-August on the 30th of last month, dropped to 6.0% as of the 5th. Unlike credit transactions where stocks are traded by borrowing loans from securities firms, entrusted trading unpaid balances occur when the securities firm pays the stock settlement amount on behalf of the investor for three trading days due to insufficient payment. If the investor fails to repay the amount by the third trading day, forced sales occur where the securities firm forcibly sells the stocks. As of the 5th, entrusted trading unpaid balances stood at 347.9 billion won, still significantly higher than the last month's average of 278.9 billion won, but the actual ratio leading to forced sales is decreasing.

While aggressive investments using borrowed funds have slowed due to the market plunge, corporate earnings and other fundamentals are still expected to remain solid, leading to an increase in investors buying at the bottom with their own funds. According to financial information analysis firm FnGuide, as of this day, the consensus market forecast for KOSPI net profit this year is 178.4349 trillion won, an increase of 122.18% compared to the previous year. Individual investors’ buying momentum is also continuing. From the 28th of last month to the day before, they recorded net purchases for six consecutive trading days, buying a total of 2.9507 trillion won worth of stocks. Despite the KOSPI closing down about 6.1% during this period, they consistently showed buying behavior.

Hwang Sewoon, a research fellow at the Korea Capital Market Institute, explained, "The recent decline appears to be largely due to temporary drops caused by external uncertainties such as conflicts between the U.S. and China, rather than a fundamental economic crisis leading to a large-scale recession," adding, "As this perception spreads among individual investors, they see the current point as an opportunity to reorganize their portfolios and are actively buying at the bottom."

In the securities industry, there is an analysis that it is more advantageous to wait for the market to stabilize rather than selling stocks expecting further declines. The investment strategy team at Hanwha Investment & Securities said, "The yield gap (the difference between expected stock returns and bond yields), which gauges the valuation attractiveness of the KOSPI, has averaged 8.4 percentage points since 2010, but as of the 6th, it rose to 8.98 percentage points," adding, "Even if the Bank of Korea raises the base interest rate by 1% next week, the KOSPI yield gap still exceeds the average since 2010, so the current point can be seen as an undervalued range for the KOSPI."

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