Amid a record-breaking bull market, investors are divided in their strategies. As the KOSPI continues to hit all-time highs, funds in derivative trading accounts, margin trading balances, and investor deposits have surged to unprecedented levels, indicating a significant increase in long positions. Conversely, the amount of funds set aside for short selling has also reached record highs, reflecting a growing interest in short positions in anticipation of a market correction following the recent surge.
According to the Korea Financial Investment Association, as of May 7, the balance of funds in derivative trading accounts reached 38.2567 trillion won, marking an all-time high. This represents an increase of over 6 trillion won compared to the previous week’s figure of 32.2335 trillion won on April 30. Compared to the 18.3986 trillion won recorded on the first trading day of the year, January 2, this amount has more than doubled in just four months.
Funds in derivative trading accounts are reserved for investments in exchange-traded derivatives such as KOSPI 200 futures and options. Due to their higher volatility and frequent use of leverage, these funds are typically seen as indicators of aggressive investor sentiment. Analysts suggest that the recent sharp rise in the KOSPI has led to a significant influx of capital into the derivatives market as investors bet on further gains.
The scale of margin trading, or borrowing to invest, is also nearing risky levels. The balance of margin trading loans surpassed 36 trillion won for the first time at the end of April and has remained around 35 trillion won since then. Margin trading represents the amount borrowed by investors from brokerage firms to invest in stocks, and it tends to increase rapidly when bullish sentiment is strong. Additionally, investor deposits, which serve as market liquidity, reached a record high of 137 trillion won on May 7, indicating a substantial increase in available capital for investment.
However, concerns are growing regarding the relatively weak risk management capabilities of individual investors. Data shows that individual investors have incurred losses amounting to billions of won annually in derivative trading from 2020 to 2024. While high volatility and leverage can lead to significant profits in a rising market, they can also result in rapid losses if market conditions shift.
At the same time, there is an increasing caution among market participants regarding potential volatility following the recent surge. The balance of funds set aside for short selling has recently surpassed 180 trillion won for the first time. As the stock market remains bullish, both long and short positions are being established as investors prepare for potential corrections after reaching new highs.
Market analysts believe that corporate earnings will be a key factor in determining whether the KOSPI can continue its upward trajectory. Lee Kyung-min, a researcher at Daishin Securities, stated, "As long as the upward trend in leading earnings per share (EPS) remains intact, the likelihood of continued gains is high. We should keep the possibility of further increases open rather than hastily limiting the KOSPI's upside potential."
* This article has been translated by AI.
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