KOSPI Takes a Breather After 'Miracle Run'... Will 23 Trillion Won in Debt-Fueled Retail Investors Join In? [why&next]

Foreign and Institutional Buying Tends to Slow Ahead of Holidays
Individual Margin Balances Near 23 Trillion Won; Unsettled Receivables Hit Monthly High

The scale of individual investors' "debt-fueled investing" has continued to reach new annual highs. With retail investors, known as Donghak Ants, responding to the recent "miracle run" of the KOSPI by remaining net sellers, attention is focused on whether they will change their investment strategy.

Record Highs for Seven Consecutive Trading Days... KOSPI's 'Miracle Week'

According to the Korea Exchange on September 22, the KOSPI closed at 3,445.24 on September 19, down 0.46%. During the session, it soared to 3,467.89, setting a new all-time high. Individual investors alone purchased 534.4 billion won worth of shares, absorbing the selling by foreign and institutional investors.

Yeom Dongchan, a researcher at Korea Investment & Securities, commented on the KOSPI's slightly negative close, saying, "The supply and demand from individuals does not change significantly before and after the holidays, but foreign and institutional investors tend to slow their buying momentum two to three trading days before the holidays." He added, "Given the possibility of a supply and demand gap, we should be mindful of a potential short-term slowdown in the upward trend, but the correction is unlikely to be severe."

So far, individual investors have been lukewarm toward the KOSPI's record-breaking rally. In fact, while the KOSPI jumped 8% this month, individuals sold off 9.67 trillion won worth of shares. From September 2 to 16, they recorded net selling for 11 consecutive trading days. However, as the September Federal Open Market Committee (FOMC) event passed without incident and the government began to implement market-friendly policies, there is a growing sentiment that individuals may soon turn to net buying.

Debt-Fueled Investing Nears 23 Trillion Won

One of the reasons cited for the anticipated full-scale "return to the domestic market" by Donghak Ants is the scale of debt-fueled investing. According to the Korea Financial Investment Association, as of September 17, the outstanding balance of margin loans stood at 22.7797 trillion won (13.8002 trillion won for KOSPI stocks and 8.9795 trillion won for KOSDAQ stocks), marking a new annual high for seven consecutive trading days. This represents an increase of about 31% compared to the beginning of the year (approximately 15.5 trillion won). The all-time high was 25.654 trillion won (September 13, 2021).

The outstanding balance of margin loans refers to the amount investors have borrowed from securities firms to purchase stocks and have not yet repaid. This figure typically rises when a stock price increase is anticipated. Recently, as the United States cut interest rates and expectations have grown that Korea will follow suit, demand for margin trading, which is influenced by lending rates, has increased.

Unlike margin loans, which have relatively long maturities of 90 to 180 days, the balance of unsettled receivables from consignment trading, which matures in just three trading days, has also ballooned. As of September 17, unsettled receivables from consignment trading reached 929.6 billion won, the highest level this month. Unsettled receivables from consignment trading refer to the amount borrowed from securities firms when investors purchase stocks by paying only 40% of the transaction amount with their own funds. An increase in this figure indicates that more investors are betting on a short-term market surge. If the amount is not repaid within the maturity period, the securities firm will initiate forced selling of the relevant stocks.

An official at a securities firm explained, "Given that individual investors' net selling of KOSPI stocks has approached 10 trillion won this month, it appears that Donghak Ants are still highly sensitive to empirical data suggesting a return to the so-called 'Boxpi' (sideways market). Nevertheless, the expanding pool of funds flowing into the stock market is a positive factor." Currently, investor deposits recognized as funds waiting to enter the stock market stood at 74.9 trillion won as of September 16, approaching the all-time high of 77.9 trillion won set in May 2021.

Some analyses have also noted the simultaneous expansion of both domestic and overseas stock investments. Yoon Yudong, a researcher at NH Investment & Securities, stated, "Until last year, domestic stock investors would move to overseas stocks depending on events, and vice versa. However, starting this year, the trading volumes of both markets are either being maintained or increasing together." He added, "With the interest rate cut cycle and the government's commitment to activating alternative investment vehicles, further market growth is becoming more visible."

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