South Korea Investor Deposits Climb to 117.7 Trillion Won as Ceasefire Hopes Revive Stock Buying

Investor deposits rise to 117.7 trillion won, highest in three weeks

Margin buying on the Kospi hits a record 23.0406 trillion won, with most of the money flowing into chip stocks

Money is pouring back into South Korea’s stock market as ceasefire hopes build after the U.S. and Iran signaled a willingness to resume negotiations.

According to the Korea Financial Investment Association, investor deposits stood at 117.6724 trillion won as of Aug. 14. That was the highest level in three weeks since July 24, when the balance reached 119.7599 trillion won. It also nearly returned to the 118.7487 trillion won recorded on Feb. 27, just before the U.S.-Iran war.

Investor deposits are funds clients place with brokerages to buy stocks and other assets. They are widely viewed as money waiting on the sidelines for the equity market. An increase in those balances typically signals improving investor sentiment.

After falling to a postwar low of 107.4674 trillion won on Aug. 6, the balance rose by more than 10 trillion won in six trading days as news spread of a two-week truce between the U.S. and Iran.

Although the first face-to-face ceasefire talks held over the weekend in Islamabad, Pakistan, ended without a deal, hopes for an end to the conflict strengthened after U.S. President Donald Trump and Iranian officials expressed a strong willingness to continue negotiations.

Expectations for talks are driving the latest gains in South Korean stocks, said Lee Kyung-min, an analyst at Daishin Securities. Trump has said the war with Iran is nearly over and that something could happen within two days. Progress in ceasefire talks between Israel and Lebanon could also be taken positively, Lee said, given that Iran had cited Israel’s attacks on Lebanon as justification for closing the Strait of Hormuz.

With the domestic stock market showing signs of recovery, debt-fueled stock buying is also accelerating.

Outstanding credit extended to investors stood at 33.2824 trillion won as of Aug. 14, according to the association. Of that, 23.0406 trillion won was on the Kospi market alone, setting a record high. Credit extension refers to money that financial institutions lend based on an investor’s assets or creditworthiness.

Margin trading in South Korea’s stock market has risen sharply, led by semiconductor shares. As of Aug. 13, Samsung Electronics’ margin loan balance stood at 3.4126 trillion won, up 107% from the end of last year and 47% from before the war. SK Hynix’s margin loan balance increased 30% over the same period, rising from 1.7358 trillion won before the war to 2.2656 trillion won as of Aug. 13.

The improvement in sentiment appears to have accelerated after Samsung Electronics on Aug. 7 reported quarterly operating profit of 57 trillion won, far above market expectations, despite supply-chain risks stemming from the war.

Brokerages that had suspended margin trading during last month’s volatile market are also resuming those services. NH Investment & Securities said on Aug. 13 that it had restarted margin loans and stock-backed lending. The company had suspended margin financing and securities-backed loans from July 13. Hana Securities also resumed margin lending this month.

KB Securities eased restrictions on margin-financed purchases, restoring the per-customer limit from 500 million won to the contracted ceiling of 3 billion won. Hanyang Securities temporarily lowered rates on non-face-to-face credit services.

Noh Jung-dong, Hankyung.com reporter dong2@hankyung.com