Seoul: South Korean retail investors borrowed a record amount from securities firms in the second quarter of this year as the local stock market extended its strong rally, industry data showed Sunday.
According to Yonhap News Agency, the combined average daily balance of margin loans and stock-backed loans reached a record 61.98 trillion won (US$40.5 billion) in the April-June period, up from 57.42 trillion won in the January-March period. The Korea Financial Investment Association (KOFIA) provided this data, highlighting a significant increase in investment activities.
The average daily outstanding balance of margin loans stood at 46.95 trillion won in the second quarter, reflecting a 15.9 percent rise from the first-quarter average of 31.01 trillion won. Margin loans refer to funds borrowed by investors from brokerage firms to purchase stocks that have yet to be repaid and are widely regarded as a key gauge of debt-funded stock investing.
Additionally, the average daily balance of stock-backed loans, which allow investors to borrow against pledged securities, came to 25.97 trillion won in the April-June period. This surge in borrowing is expected to have boosted brokerage earnings, with domestic securities firms estimated to have earned more than 1.4 trillion won in interest income from margin loans and stock-backed lending during the second quarter.
Industry officials noted that much of the borrowed funds may have been reinvested in the equity market. Retail investors were keen to capitalize on the recent stock rally, as evidenced by the benchmark KOSPI's remarkable jump of about 68 percent during the second quarter, from the end of March to the end of June, outperforming most major global equity markets.