Margin loan balances in Korea's stock market, commonly referred to as "debt investing," exceeded 30 trillion won for the second consecutive day, reaching a record high. As leveraged investment demand surged during the market rally, the KOSPI plunged more than 5% in a single day, raising alarm bells over potential margin calls. Concerns are growing that losses could cascade as volatility increases, with liquidation pressure likely to intensify during short-term corrections.
According to the Korea Financial Investment Association, margin loan balances in the domestic stock market totaled 30.28 trillion won ($22.2 billion) as of December 30. This marks the third consecutive trading day of increases since breaching the 30 trillion won threshold for the first time on December 29. Margin loan balances refer to funds borrowed by investors from securities firms to purchase stocks that have not yet been repaid.
With leveraged investments surging amid expectations of a market rally, a significant correction could push stock prices below the required collateral maintenance ratio. Margin calls occur when investors fail to repay borrowed funds from securities firms as stock prices decline. When settlement funds are insufficient or collateral ratios fall below the threshold after purchasing stocks on margin or credit, securities firms forcibly liquidate holdings on the next business day.
While margin call amounts relative to unsettled brokerage trades currently stand at approximately 9.7 billion won, lower than this year's peak of 19.3 billion won, the figure is about 37% higher than last year's daily average of 7.1 billion won.
Market analysts warn that risks could accumulate around margin trading if sharp market declines recur. "Major global markets experienced a sharp selloff as Kevin Warsh, former Federal Reserve governor, emerged as the leading candidate for the next Fed chair, coinciding with profit-taking sentiment," said Park Sang-hyun, a researcher at iM Securities. "Overall volatility could increase for the time being, and if another significant correction occurs, liquidation pressure could escalate substantially."
Meanwhile, investor deposits increased for five consecutive trading days, reaching a record high of 106.03 trillion won. The number of accounts participating in stock trading also rose to 100.17 million as of December 30, reflecting rapidly spreading investment enthusiasm.