This month, as the KOSPI index continues to decline, individual investors have significantly increased their net stock purchases compared to the sharp drop in July. While interest in single-stock leveraged products has waned, borrowing money from brokerages to buy stocks, known as 'margin trading,' has actually risen.
According to the Korea Exchange on October 19, individual investors net purchased 14.71 trillion won in the securities market during the recent downturn. This amount is 4.3 times higher than the net purchase of 3.41 trillion won during the market decline in July. This indicates that individual investors are actively seeking to capitalize on the market drop as a buying opportunity.
The scale of margin trading among individual investors has also increased. The Korea Financial Investment Association reported that the average balance of credit trading loans over the past seven trading days was 33.69 trillion won, an increase of 9.05 trillion won (2.76%) compared to the sharp decline period in July (July 22-30). The balance of credit trading loans reflects the amount borrowed by investors from brokerages to purchase stocks, serving as a key indicator of individual investors' margin trading levels.
In contrast, the amount of investor deposits, which serve as standby funds in the stock market, has decreased. During the same period, the average investor deposit fell from 106.35 trillion won during the July decline to 99.49 trillion won this month, a decrease of 6.86 trillion won (6.45%). Investor deposits represent the funds that investors have set aside with brokerages for stock purchases, indicating potential buying power in the market. While standby funds have decreased, the increase in credit trading balances highlights the growing burden of leveraged investments.
The scale of forced liquidations has also increased. The Korea Financial Investment Association noted that the average daily amount of margin call liquidations fell from 1.18 trillion won during the July decline to 1.13 trillion won this month, a decrease of 418 billion won (3.55%). However, the actual amount of forced liquidations compared to margin call balances rose from an average of 33.1 billion won to 42.6 billion won, an increase of 9.5 billion won (28.7%). This indicates a rise in the value of stocks that were forcibly sold due to failure to meet payment deadlines.
Although investment in leveraged products has decreased, the increase in margin trading is the most notable characteristic of this downturn. From July 23 to 30, individual investors net purchased 1.3 trillion won in 18 single-stock leveraged and inverse products. However, following the Financial Services Commission's tightening of investment requirements for these products, net purchases this month have dropped to about 10% of that amount.
Some market observers express concern that if market volatility continues, the burden on margin traders could increase further. With foreign investors continuing to sell off their holdings and domestic institutional investors' buying power also limited, this could pose challenges for any potential rebound in the index. If foreign capital does not begin to flow back into the market, predictions suggest that the domestic stock market may remain in a range-bound state for the time being.
According to the Korea Exchange on October 19, individual investors net purchased 14.71 trillion won in the securities market during the recent downturn. This amount is 4.3 times higher than the net purchase of 3.41 trillion won during the market decline in July. This indicates that individual investors are actively seeking to capitalize on the market drop as a buying opportunity.
The scale of margin trading among individual investors has also increased. The Korea Financial Investment Association reported that the average balance of credit trading loans over the past seven trading days was 33.69 trillion won, an increase of 9.05 trillion won (2.76%) compared to the sharp decline period in July (July 22-30). The balance of credit trading loans reflects the amount borrowed by investors from brokerages to purchase stocks, serving as a key indicator of individual investors' margin trading levels.
In contrast, the amount of investor deposits, which serve as standby funds in the stock market, has decreased. During the same period, the average investor deposit fell from 106.35 trillion won during the July decline to 99.49 trillion won this month, a decrease of 6.86 trillion won (6.45%). Investor deposits represent the funds that investors have set aside with brokerages for stock purchases, indicating potential buying power in the market. While standby funds have decreased, the increase in credit trading balances highlights the growing burden of leveraged investments.
The scale of forced liquidations has also increased. The Korea Financial Investment Association noted that the average daily amount of margin call liquidations fell from 1.18 trillion won during the July decline to 1.13 trillion won this month, a decrease of 418 billion won (3.55%). However, the actual amount of forced liquidations compared to margin call balances rose from an average of 33.1 billion won to 42.6 billion won, an increase of 9.5 billion won (28.7%). This indicates a rise in the value of stocks that were forcibly sold due to failure to meet payment deadlines.
Although investment in leveraged products has decreased, the increase in margin trading is the most notable characteristic of this downturn. From July 23 to 30, individual investors net purchased 1.3 trillion won in 18 single-stock leveraged and inverse products. However, following the Financial Services Commission's tightening of investment requirements for these products, net purchases this month have dropped to about 10% of that amount.
Some market observers express concern that if market volatility continues, the burden on margin traders could increase further. With foreign investors continuing to sell off their holdings and domestic institutional investors' buying power also limited, this could pose challenges for any potential rebound in the index. If foreign capital does not begin to flow back into the market, predictions suggest that the domestic stock market may remain in a range-bound state for the time being.
* This article has been translated by AI.
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