The South Korean stock market has seen a rapid surge past 6000 points, prompting rising concerns as more investors turn to debt financing for purchasing stocks and predicting an impending decline in the market.
The South Korean KOSPI index has recently surged past the significant 6000-point mark, driven by increased retail investor activity, particularly in debt financing for stock purchases, a practice known as 'debt investments' (λΉν¬). As of February 24, the stock margin loan balance reached a record high of approximately 31.96 trillion won, an increase of about 4.5 trillion won or 16.5% since early January. This significant increase indicates that many individual investors are taking on debt to enter the market, reflecting a risky sentiment amid a strong but potentially volatile market situation.
Conversely, alongside this soaring index, measures for protecting against stock price declines are also at their peak. The balance of short-selling waiting funds, known as the 'borrowed fund balance', has surged to about 153 trillion won as of February 24, up significantly from earlier in the year. This surge suggests that many traders are preparing for a downturn in stock prices, highlighting a growing sentiment of caution against the backdrop of rapid market gains. Such behavior indicates that investors are anticipating substantial corrections or declines in both KOSPI and KOSDAQ indexes due to the heated market conditions.
Additionally, the so-called 'Korean Fear Index' continues to climb, with the KOSPI 200 Volatility Index (VKOSPI) reaching 49.57 on the same day, nearing its highest level since February 2020, and a potential peak of 50.99 during trading hours. This measurement reflects increased volatility concerns among investors, suggesting that while the market rallies attract borrowing and investment, they also provoke fears of a sharper correction, marking a highly uncertain period for the South Korean equity market.
