Some South Korean brokerages have little room to fund customers’ share purchases as more retail investors borrow money to invest in the white-hot secondary stock market, industry sources said.
The tech-heavy KOSDAQ market has recently been on a roll on listed firms’ improved earnings and other positives. Its key index closed up 1.59 percent at 780.22 on Thursday, extending its gaining streak to seven sessions and exceeding the 780-point level for the first time in 28 months.
According to the sources, small-capital securities companies have suspended the extension of margin loans and stock-backed lending to customers to manage their margin lending caps. South Korean law bans securities companies from extending margin and stock-backed loans to customers in excess of their equity capital.
Other big-capital securities have yet ample room to finance customers’ share purchases, but they have also seen margin and stock loans increase sharply in recent months on the back of the bullish stock market. According to the Korea Financial Investment Association, outstanding margin loans have been on the rise since touching the 9 trillion won (US$8.2 billion) mark early this month.