Credit loan balance for stock investment close to W9 trillion

The credit loan balance taken out by private stock investors reaches just under 9 trillion won fueled by Korea’s bull market.

According to data by the Korea Financial Investment Association (KOFIA) and the Korea Exchange (KRX), the balance for credit financing hit a record 8.93 trillion won Thursday.

This it said represents a 31.9 percent increase from the 6.77 trillion won tallied in late 2016.

The capital market association KOFIA said the increase in loans comes as retail investors are expecting a rise in local stock prices going forward. The money can be used to buy shares and when prices go up, with investors selling their shares to lock in profits while being able to pay back their debt.

Korea’s main bourse, the Korea Composite Stock Price Index (KOSPI), had been breaking records in recent trading sessions thanks to solid third quarter earnings reports and strong overseas demand for Korean-made goods.

The KOSPI closed at a new record high of 2,557.97 points Friday, with analysts expecting steady growth till the end of the year.

Market data showed that credit loans have been rising coming into this year, surpassing the 7 trillion won mark Jan. 9 and reaching 8 trillion won June 8.

The last time that the balance reached about the 8 trillion won mark was in late July 2015.

At this rate, KOFIA and KRX predicted the total loans could exceed 9 trillion won, with most observers saying the amount of credit is not something to worry about at present.

“The size of the market naturally leads to an increase in loans, and the current trend is nothing out of the ordinary,” said Kim Hyung-ryeol, an analyst for Kyobo Securities Co.

This view was supported by Rhyu Yong-suk, a market researcher at KB Securities who said the current market cannot be seen as being a bubble, which was sometimes the case in the past.