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S. Korea's stock loans jump amid relief rally

All News 09:53 April 06, 2016

SEOUL, April 6 (Yonhap) -- South Korean retail investors have sharply increased their borrowings to buy stocks amid a recent relief rally in the local bourse, market data showed Wednesday.

According to the data compiled by the Korea Financial Investment Association, the so-called margin debt for local stocks stood at 6.88 trillion won (US$5.95 billion) as of Monday, up 10 percent from the yearly low of 6.27 trillion won recorded on Feb. 29.

The amount of margin loans to purchase stocks traded on the main KOSPI market came to 3.15 trillion won, with the remainder for shares registered with the tech-heavy, secondary KOSDAQ market.

Market watchers attributed the surge in margin lending to investors taking a bullish approach amid monetary easing by major economies.

In early March, the European Central Bank rolled out measures that beat market expectations by cutting all its interest rates and expanding the scope of its bond-buying program. In mid-March, the Fed implied two interest rate hikes this year instead of the four previously anticipated after a two-day policy meeting.

The ECB and Fed moves sparked bets on risky assets, such as shares and currencies in emerging markets, with the benchmark KOSPI index breaching the psychologically important 2,000 mark.

Striking a cautious note, analysts predicted the momentum of the stock market rally would be limited down the road and advised investors to take a conservative approach. The KOPSI rose a mere 3.3 percent during the cited period, according to the data.

"The main stock market is being swayed by foreign investors amid a lack of clear positive leads," said Lee Kyung-min, a researcher at Daishin Securities Co. "Investors need to be cautious as market uncertainties linger."

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