South Korea Margin Debt Hits Record 35.46 Trillion Won as Kospi Rally Extends

South Korean retail investors' margin borrowing has climbed to a record as the Kospi extends its run to fresh highs. Demand for leveraged stock purchases is growing as the benchmark index moves closer to 7,000.

Outstanding margin loans in the domestic stock market stood at 35.4639 trillion won ($25.7 billion) as of April 24, according to the Korea Financial Investment Association. The measure tracks money investors borrowed from brokerages to buy stocks and have yet to repay, making it a key gauge of debt-fueled retail investing.

Margin-loan balances first topped 35 trillion won on April 23 and set another record a day later. They have risen for 11 straight trading sessions since April 10. The balance has increased by 2.47 trillion won ($1.79 billion) this month, or 7.4%.

By market, margin loans totaled 24.5793 trillion won ($17.8 billion) on the Kospi and 10.8836 trillion won ($7.88 billion) on the Kosdaq. The upward trend has continued even after brokerages moved to limit margin lending, including Mirae Asset Securities' April 22 adjustment to margin requirements and stock groupings for some shares.

Margin lending typically increases when expectations for stock gains strengthen. As the Kospi has climbed sharply beyond levels seen before the Iran war, retail investors have been using borrowed funds to increase their exposure.

The Kospi closed at 6,615.03 on April 27, ending above 6,600 for the first time on record. With 7,000 now in sight, individual investors' appetite for risk is also rising as they seek to ride the rally.

Still, margin borrowing can magnify losses as well as returns. Because the loans are backed by stocks as collateral, a drop in share prices can trigger forced sales if collateral values fall short, potentially deepening investor losses.

Oh Se-seong, Hankyung.com reporter sesung@hankyung.com