KOSPI approaches the 7,000-point mark... "Loan investment" scale hits a record high

As the KOSPI index hits new record highs for consecutive days and approaches the 7,000-point mark, the so-called “margin trading” scale, which involves borrowing funds from securities firms to invest in stocks, has expanded to its highest level in history.

According to data from the Korea Financial Investment Association on the 27th, as of April 24th, the domestic stock market’s credit trading financing balance was 35,463.9 billion won. The credit trading financing balance refers to the amount borrowed by individual investors from securities firms to purchase stocks that has not yet been repaid. After surpassing 350 trillion won for the first time on the 23rd, it hit a new record again just one day later, and has increased for 11 consecutive trading days since the 10th. This month alone, it increased by 2,470 billion won, a 7.4% rise.

Looking at individual markets, the credit trading financing balance in the securities market was 24,579.3 billion won, and in the KOSDAQ market, it was 10,883.6 billion won. On the same day, the KOSPI index rose 139.40 points (2.15%) from the previous trading day, closing at 6,615.03 points, marking the first time it has crossed the 6,600-point threshold in history. Analysts believe that due to the sharp short-term rise in the index, expectations among individual investors that the upward trend will continue have strengthened, resulting in increased borrowing to expand investment scales. Credit trading financing generally increases as expectations for rising stock prices grow.

Securities firms are also taking steps to manage risks. Starting from April 22nd, Future Asset Securities adjusted margin requirements and stock categories for some stocks, strengthening the conditions for credit financing use. Other securities firms are also discussing or implementing similar restrictions. The margin requirement refers to the proportion of self-funding investors must initially bear when purchasing stocks; increasing this ratio naturally reduces investments made with borrowed funds. However, due to the rapid market rise in recent times, even with such measures, the overall credit balance continues to grow.

The issue is that leverage—investing with borrowed funds—can amplify gains during a rising market but also accelerate losses during a downturn. Since stocks purchased through credit financing serve as collateral for loans, a sharp decline in stock prices can cause the collateral value to fall short. At that point, regardless of investors’ intentions, forced liquidation of stocks—“reverse trading”—may occur. Under the current circumstances of rising indices and a heated investment frenzy, capital inflows may further increase, but if volatility expands, market shocks could intensify. Therefore, future risk management for investors will become even more crucial.