S. Korea's stock loans jump in tune with market rally

All News 09:00 July 01, 2017

SEOUL, July 1 (Yonhap) -- More and more investors in South Korea are borrowing money to buy stocks amid a bull run in the local market, with the amount of such loans rising to the highest level ever, market data showed Saturday.

The amount of money borrowed to buy stocks, so-called margin debt, reached 8.51 trillion won (US$7.43 billion) as of Thursday, marking the all-time high figure, according to the data compiled by the Korea Financial Investment Association (KOFIA).

The figure compares with 6.77 trillion won worth of margin debt at the end of last year and 6.52 trillion won as of end 2015.

The country's stock market is undergoing a stunning run this year, aided by sound corporate earnings and hopes for a set of stimulus measures under new President Moon Jae-in and an overall recovery in economic conditions.

The country's benchmark index, the KOSPI, has gained some 18 percent so far this year, to end at 2,391.79 points Friday, after hitting an all-time intraday high of 2,402.80 points Thursday.

The margin debt for the main bourse came to 4.14 trillion won as of Thursday. The comparable figure for the KOSDAQ was 4.38 trillion won, the association said.

Analysts said margin debt may further rise down the road as the country's stock market is expected to build up further gains, reaching up to the 2,600-point level.

"A bull run on the local stock market fueled margin debt," said Kim Yong-koo, an analyst at Hana Financial Investment Co. "They are betting the local market has room to rise further."

The sharp rise in stock investment using leveraged money, however, has raised concerns over turbulence when the market goes down following hefty gains.

"Investors could suffer hefty losses should the local market go south ... and they need to be cautious in borrowing money to buy stocks," Kim said.