A booming stock market often carries a fear of a sharp pullback, and that risk grows when prices rise as fast as they have recently. Even without Warren Buffett’s remark that it can feel closer to a casino, warnings about overheating are growing.
Analysts say investors should watch for “hidden bombs” in the rally, starting with debt-fueled trading. The Korea Financial Investment Association said margin-loan balances stood at 35.7131 trillion won as of April 30. After topping 35 trillion won for the first time on April 23, the figure jumped to a record 36.0681 trillion won on April 29. That is up more than 20% from the start of the year.
Investor deposits totaled 124.7591 trillion won as of April 30. They had exceeded a record 132 trillion won as of March 4, shortly after the outbreak of war in the Middle East, then fell to 107 trillion won. Deposits climbed back above 120 trillion won in mid-April and have been rising again.
Market watchers say deposits and margin balances rising together suggest more money is betting on further gains. In a market that has surged in a short period, even a small correction can trigger forced selling, accelerating declines.
Heavy concentration in semiconductors is another concern. The market’s rise on May 6 was driven in large part by Samsung Electronics and SK hynix, which both jumped more than 10%. On the same day the KOSPI touched 7,500, decliners (679) outnumbered advancers (202) by more than three to one among listed issues, underscoring the narrowness of the rally.
Some investors are already taking losses as the rally continues, particularly those making “contrarian” bets through leveraged inverse products. The Korea Exchange said the most net-bought ETF by individual investors over the past month was KODEX 200 Futures Inverse 2X, a major double-leveraged inverse product. Its return was -43.91%, and other inverse ETFs also posted losses of more than 40%.
A securities industry official said risk management becomes more important when markets keep setting records, and warned against excessive leverage, derivatives trading and chasing prices higher.
* This article has been translated by AI.
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