Particular person traders in Korea who’ve jumped on the retail inventory fad by borrowing may lose greater than they invested, because the sale of their collateralized shares may attain 1,000 billion received ($ 858 million) this yr. because of the fall in inventory costs.
In line with Monetary Supervisory Service knowledge obtained by Democratic Get together lawmaker Lee Yong-woo’s Maeil Enterprise Newspaper, the quantity of compelled gross sales of margin accounts within the first eight months of this yr totaled 700 billion received.
Purchases of shares on margin credit score at present quantity to 25 trillion received, which is 100 occasions the quantity of unhedged short-term loans. In contrast to unsecured short-term credit score agreements the place traders have three buying and selling days to repay their loans, margin credit score has an extended reimbursement interval however sometimes earns 10% curiosity per yr. Any shares bought on credit score may very well be confiscated and resold available in the market if traders don’t meet the reimbursement phrases.
The compelled sale of margin purchases peaked at 395.2 billion received in March final yr when the benchmark Kospi fell under the 1,500 stage because of the COVID-19 outbreak. Virtually 100 billion received of shares purchased on credit score have been confiscated and resold available in the market in a single day, inflicting inventory costs to fall once more.
After hovering at ranges of 60-90 billion received earlier this yr, compelled gross sales climbed once more to 134.5 billion received final month amid the frenzy of abroad gross sales on the native market. In August, foreigners bought a report 6 trillion received, bringing Kospi down to just about 3,000. Day by day compelled gross sales reached 24.2 billion received on August 18, 14.5 billion received on August 19. and 38.7 billion received on August 23.
Market analysts predict that the mixed compelled sale will exceed 1,000 billion received by the top of this yr if the market continues to fall. Final yr, the full quantity of compelled gross sales reached 1,200 billion received, in accordance with knowledge from the FSS.
By Moon Ji-woong and Lee Soo-min
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]