The Temptation of 3.9% Annual Rates for Debt-Fueled Retail Investors... Securities Firms Compete to Attract Investors by Lowering Interest Rates

With the dawn of the "Ocheonpi" and "Cheonsdaq" eras and the stock market experiencing unprecedented highs, individual investors' "debt-fueled investing" (borrowing to invest) has also surged to record levels. In response, securities firms are rolling out preferential interest rate benefits to attract investors.

According to the Korea Financial Investment Association on January 27, the balance of margin loans as of January 21 stood at 29.0821 trillion won, marking an all-time high. The previous day, the balance had reached 29.0586 trillion won, surpassing 29 trillion won for the first time ever, and it increased further just a day later. The margin loan balance, which was in the 24 trillion won range in October last year, has steadily risen as the KOSPI continued its upward trend. In November, it climbed to the 26 trillion won range, surpassed 27 trillion won in December, and in January, consecutively broke through 28 trillion and then 29 trillion won.

Investor deposits, regarded as idle funds waiting to enter the stock market, have also been steadily increasing. As of January 21, deposits reached a new record high of 96.3 trillion won.

As more investors seek to ride the bull market, securities firms are busier than ever. To attract the growing number of investors, they are rapidly lowering margin loan interest rates.

Hana Securities is running a "Margin Loan Event" that lowers the margin loan interest rate to an annual 3.9% until March 27. Eligible participants are customers who, as of the event application date, have no margin loan or margin balance history in any account from October 1 of last year up to the day before application, and who hold non-face-to-face or bank-opened accounts. Customers who participate in the event can enjoy the 3.9% annual margin loan rate benefit for up to 180 days. A Hana Securities representative explained, "With domestic stock trading becoming more active and margin trading increasing, we decided to offer a discount on margin loan interest rates and provide additional benefits through this event."

Hanwha Investment & Securities is currently holding a "Loan Transfer Upgrade" event until March 31, which allows investors to reduce their interest burden by refinancing their stock loans. If customers complete the transfer of their stock loans to Hanwha Investment & Securities during the event period, they will receive an annual interest rate of 3.9% for 90 days.

Woori Investment & Securities is also running a preferential interest rate event for margin loans and stock-backed loans at an annual rate of 3.9% until the end of this year to reduce customers' investment capital management burden. Customers who open an account and sign up for a margin loan or stock-backed loan agreement at Woori Investment & Securities will automatically receive the preferential rate without a separate application.

As debt-fueled investing increases, warnings are also being raised. While margin loans can generate high returns when stock prices rise, they can also result in forced liquidation if stock prices fall and the value of pledged shares declines, leading to potential losses. An industry insider commented, "With the recent stock market rally, the FOMO (fear of missing out) sentiment is becoming more pronounced, and more investors are joining the stock investment bandwagon. However, it is important to remember that investing with margin loans carries the risk of losses."