Individual Investors' Borrowed Investments Surge, Increasing Market Risk

Analysts warn that the surge in individual investors' 'bittu' (investing with borrowed funds) could increase risks across the entire stock market. The scale of margin trading loans, which stood at 27 trillion won at the beginning of the year, has recently ballooned to nearly 36 trillion won, and the outstanding balances in the overdraft accounts of the five major banks have surpassed 40 trillion won.

This increase in bittu not only leads to substantial personal losses for investors when stock prices fall but can also destabilize the market as a whole. In the event of a stock price decline, forced selling by securities firms – known as 'reverse trading' – to cover collateralized shares can accelerate downward market pressure. In March, 108.4 billion won worth of shares were forcibly sold during a sharp stock price drop, which is 22 times the daily average from the previous year.

Margin financing can amplify investor losses through reverse trading when stock prices fall. Hwang Sun-oh, the Financial Supervisory Service's Deputy Governor, cautioned about the possibility of amplified investment losses alongside high interest costs. The 'bittu' behavior of individual investors can be a factor that exacerbates market volatility. Financial authorities are encouraging management reinforcement measures, such as some securities firms suspending new margin trading.