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S. Korea's stock loans soar amid bullish outlook

All Headlines 09:11 April 12, 2016

SEOUL, April 12 (Yonhap) -- South Korea's stock purchases on credit hit a seven-month high as more investors borrowed money from brokers to bet on a bullish market, data showed Tuesday, sparking concerns over potential price swings.

According to the data compiled by the Korea Financial Investment Association, outstanding margin loans reached 7.05 trillion won (US$6.15 billion) as of Friday. It marks the first time since Aug. 24 last year that the amount has surpassed the 7-trillion won mark.

Margin loans taken to purchase stocks traded on the main KOSPI market came to 3.27 trillion won, with the remainder for shares registered with the tech-heavy, secondary KOSDAQ market.

The amount of outstanding margin loans was also up sharply from a yearly low of 6.27 trillion won recorded on Feb. 19.

Analysts warned that a spike in outstanding margin lending could emerge as a drag on the equity market as it could lead to massive selling.

"It is not a good sign that margin loans increased despite stagnant stock prices," said Kim Hyeong-ryeol, a senior researcher at Kyobo Securities Co. "The KOSDAQ market may face a greater burden as the amount of margin loans is big compared to its market cap."

Outstanding margin loans surged 12.4 percent between Feb. 19 and Friday, but the benchmark Korea Composite Stock Price Index rose a mere 2.9 percent over the cited period.

The bellwether index has been in correction mode since it rose as high as 2,002.15, but the amount of margin loans has been on the rise since then, according to the data.


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