Retail investors tap personal credit lines amid market turmoil

Retail investors went on a debt-fueled buying spree during last week's market turmoil, adding more than 600 billion won ($393.5 million) to their personal credit lines at Korea's five largest banks in just two trading days.

The combined balance of personal lines of credit — a type of revolving credit known in Korea as "minus accounts" — at KB Kookmin, Shinhan, Hana, Woori and NongHyup banks totaled 43 trillion won as of Monday,  according to the financial industry on Wednesday. 

The figure marks the highest of its kind since November 2022, when outstanding balances in minus accounts stood at 43 trillion won.

The outstanding balances at the five banks rose from 39.8 trillion won at the end of April to approximately 41.5 trillion won at the end of May. In June alone, the amount increased by approximately 1.4 trillion won within the first five trading days.

The sharpest increase came during the market turmoil on Friday and Monday, when the balances jumped by a combined 608.5 billion won in just two trading sessions. The outstanding balances increased by 136.7 billion won on Friday and by 471.9 billion won on Monday.

The Kospi had been on a record-setting rally after surpassing the 8,000-point mark for the first time on May 15. The benchmark index fell 5.54 percent on Friday due to the won's sharp decline against the dollar and weakness in semiconductor stocks.

On Monday, the index fell as low as 7,442 intraday before closing 8.29 percent lower, triggering a circuit breaker, which is activated when an index remains more than 8 percent below its previous close for at least one minute and effectively halts all trading for 20 minutes.

Market observers expect borrowing for stock investments to remain elevated amid continued volatility.  The Kospi rebounded sharply on Tuesday and closed at 8,096.93, up 8.18 percent from the previous session. The surge marked the largest single-day point gain in the index's history.

BY KIM EUN-BIN [[email protected]]