Delinquent margin borrowing surges to record high amid stock fad in Korea

2020.10.15 10:58:13 | 2020.10.15 13:52:27

[Graphics by Song Ji-yoon]이미지 확대

[Graphics by Song Ji-yoon]

Delinquent funds in margin accounts of Korean houses exceeded 100 billion won ($87.2 million) for the first time amid retail stock fad on borrowed money.

According to the Financial Supervisory Service data obtained by Rep, Yoon Doo-hyun of the main opposition People Power Party on Wednesday, accounts that failed to meet margin call, or the minimum balance requirement by the country’s 34 brokerages, reached more than 100 billion won ($87.2 million) as of August, already exceeding last year’s total of 97.1 billion won.

If a holder cannot add money to the margin account or close out positions to restore the balance to the required level, the broker can liquidate the securities in collateral or require foreclosure or eviction upon failure to pay.

Until liquidation, the delinquent loans are counted as losses at the brokerage houses.

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Meritz Securities saw the sharpest growth of 141.6 percent compared to the previous year in the margin borrowing going sour, followed by Hanwha Investment & Securities 40.5 percent, Samsung Securities 31.4 percent and Kiwoom Securities 30.6 percent.

Delinquency in margin borrowing jumped this year in line with stock buying spree by retail investors.

Individuals all across the age have flocked to the stock market to leverage on each and cheap liquidity. The jump in delinquency in margin borrowing suggests that much of losses by retailers.

Yoon said the financial authorities should step up their monitoring on credit risks to prevent the excessive investments from causing a big trouble.

By Park In-hye, Shin Yoo-kyung and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper &, All rights reserved]