Korea Margin Debt Hits Record as Samsung, SK Hynix Spur Retail Leverage

Margin Loan Balances Hit a Record High

Semiconductor Margin Debt Swelled From 2 Trillion Won to 8 Trillion Won by April

Retail investors in South Korea are rapidly ramping up debt-funded stock purchases as the local equity rally gathers pace, with margin financing driving much of the increase. The Bank of Korea said the overall scale of leveraged investing remains manageable, though a stock-market correction could amplify volatility.

The BOK’s stock-market team in its financial markets department released a report on June 4 on the status of retail leveraged equity investment. Margin loan balances climbed to a record high after surging since the second half of last year, as retail net buying and trading value increased. Market volatility also widened this year as new margin borrowing, repayments and forced liquidations all became more active at the same time.

Retail leveraged stock investment refers to borrowing directly tied to equity purchases, including margin loans and unpaid credit purchases secured by the stocks being bought, as well as securities-backed loans and stock loans backed by shares already held. Most of the increase came from margin financing. Borrowing has continued even during periods of heightened market swings, including when Middle East tensions worsened, on expectations that stocks would continue rising.

Margin debt in the semiconductor sector, as measured by the BOK, jumped more than fourfold from around 2 trillion won ($1.45 billion) at the end of last year to nearly 8 trillion won ($5.8 billion) in April. Leverage positions also expanded sharply in technology shares expected to benefit from AI data centers, including battery makers, power-equipment companies, automakers and robotics firms. Borrowing was heavily concentrated in large-cap stocks including semiconductor heavyweights Samsung Electronics and SK Hynix, as well as Hyundai Motor.

The report said the overall scale of leveraged investing was not excessive relative to market capitalization or cash waiting on the sidelines. Still, the ratio to the money supply has risen sharply, and the pace of growth in margin debt outstripped that of major markets. As of the end of last year, South Korea’s margin loan balance had risen 72.5% from a year earlier, compared with 36.3% in the US, 36.0% in China, 21.0% in Japan and 4.8% in Taiwan.

The BOK warned that excessive leverage could worsen volatility during a market correction. During the sharp share-price decline in February and March, the proportion of accounts that fell below the 140% maintenance margin requirement surged, and forced liquidations also temporarily increased. The central bank said heavily accumulated leverage could intensify downward pressure on stock prices during a selloff, alongside large-scale forced selling, risk-management moves by foreign and institutional investors, and the unwinding of derivatives positions.

Kyung-ju Kang, Hankyung.com reporter, qurasoha@hankyung.com