The domestic stock market has shown a steep upward trend, with the balance of margin trading exceeding 19 trillion won for the first time in 10 months. This means that there are more investors engaging in 'debt investing'.
According to the Korea Financial Investment Association, the balance of margin trading was 19.56 trillion won as of the 18th, marking the highest level since July 2024. Margin trading is a loan provided by securities firms that allows customers to borrow funds to purchase stocks using their owned stocks as collateral.
Due to the aggressive tariff policies of the United States, the margin trading balance, which had dropped to 16.305 trillion won in April, has increased by 3.255 trillion won in just over two months. This is interpreted as the result of an increase in individuals borrowing money to invest in stocks as the stock market has surged recently.
In the past two months (from April 18 to June 18), the stock with the largest increase in margin trading balance was Doosan Enerbility, increasing by approximately 190.7 billion won. Fueled by the so-called 'nuclear renaissance,' the stock price of Doosan Enerbility jumped roughly 2.4 times from 25,250 won to 61,000 won, indicating that many investors have leveraged their investments to buy in.
Additionally, ▲Hanwha Ocean 111.1 billion won ▲Hanwha Solutions 89.5 billion won ▲Kakao 78.6 billion won ▲KEPCO E&C 68.5 billion won ▲Hyundai E&C 64.6 billion won were also among the stocks with significant increases in margin trading balance over the past two months. All of these stocks experienced substantial price increases.
The problem arises when the margin trading balance becomes excessively amplified and adjustments occur. If the price of the stocks used as collateral falls below certain conditions, securities firms demand additional collateral, and if this cannot be met, they will engage in forced liquidation (a forced sale). This could create a vicious cycle that exacerbates the drop in stock prices. Investors must also bear credit trading interest, which is typically around 5% per year.
A similar situation occurred in 2021 when the KOSPI Index and KOSDAQ Index both surpassed 3,000 and 1,000 points, respectively. During the peak of the 'Donghak Ant Movement,' when individual investors were aggressively buying domestic stocks between June and August 2021, the margin trading balance ballooned to the 25 trillion won range. Subsequently, as the stock market declined, the margin trading balance fell to 16 trillion won by October of the following year.
Even last year, the domestic stock market continued its upward trend until July, and the margin trading balance grew to the 20 trillion won range; however, it dropped to the 17 trillion won range in August due to concerns about the semiconductor industry's crisis. After the state of emergency, it descended to the 15 trillion won range.
However, many opinions suggest that the market as a whole is not yet in an overheating phase. Investor deposits have also increased. As of the 18th, the scale of investor deposits was 63.499 trillion won. It has decreased from over 65 trillion won the previous day, but has increased by more than 10 trillion won from the April low. It is the first time since June 2022 that the scale of investor deposits has exceeded 60 trillion won.
The key issue is the ratio of margin trading balance to investor deposits. Typically, this ratio is considered to be in an overheating phase when it exceeds 35%. During the downturn following the peak in 2021, the ratio of margin trading balance to deposits was above 39%, and for last year, the critical point was in the 36% range. Currently, it is at 30.8%. It has slightly increased from a low of 29.5% on the 16th but still has a gap from overheating.
An analyst from a securities company noted, 'The recent rise in the domestic stock market is driven by foreign investors,' adding that they have been net buyers of more than 6 trillion won since last month. They continued, 'I do not believe that we are at a stage to discuss market overheating due to individual investors’ debt investing.'
Despite the escalating conflict between Israel and Iran, both the KOSPI and KOSDAQ indices closed higher the previous day. Individual investors led the rise, buying 351 billion won in the KOSPI market and 126 billion won in the KOSDAQ market.