Amid extreme volatility in the domestic stock market, the scale of individual investors’ “debt-driven investments” (investing with borrowed money) has approached an all-time high. Market concerns are growing over “forced sales” by securities firms, where stocks are forcibly liquidated to recover funds if investors fail to repay borrowed money on time.
According to the Korea Financial Investment Association, the balance of credit transaction loans in the domestic stock market stood at 37.7376 trillion Korean won as of the 4th. This remains near the record high of 38.0227 trillion Korean won set on the 29th of last month. Credit transaction loans refer to the amount investors have borrowed from securities firms to purchase stocks but have not yet repaid. Analysts attribute the surge in debt-driven investments to the “FOMO” (fear of missing out) sentiment among individual investors during the Kospi’s strong rally. On the same day, investor deposits—considered standby funds for stock investments—also hit a record high of 139.6948 trillion Korean won.
The problem lies in the increased exposure to forced sales as the Kospi approaches 9,000 while showing unprecedented volatility. The Kospi surged to 8,801.49 on the 4th, briefly surpassing 9,000, but fell to 8,160 after declining 1.84% on the 4th and 5.54% on the 5th. In the case of unsettled transactions (short-term margin trading), failure to repay borrowed funds within two trading days exposes investors to forced liquidation starting the following day. If the downward trend continues after the 8th, the scale of forced sales could surge significantly.
Securities firms warn that the domestic market may face larger corrections due to concerns over rising prices and exchange rates, as well as capital outflows ahead of SpaceX’s initial public offering (IPO). Jeong Da-un, an LS Securities senior researcher, stated, “On the 5th, Kospi 200 overnight futures hit the lower limit (-8%). If this level is reflected, the Kospi’s potential decline from its peak could widen to 14.7%.” The possibility of interest rate hikes also weighs on the market. Jeong added, “During past rate hike cycles, the Kospi recorded declines of -26.5% in August 2019 and -34.8% in September 2022 from their peaks. While it remains uncertain whether rate hikes will accelerate, dispelling concerns will not be easy.”
- 월 5900원 멤버십, 신문 독자에게는 2900원, 조선멤버십
- 55000원 상당의 신문-잡지 8종 마음껏 보기, 조선멤버십
- 현금처럼 쓸 7000포인트 받아 알뜰한 쇼핑, 조선멤버십
