Bank loans soar as Kospi surge fuels fear of missing out

A trader in Hana Bank's dealing room in Jung District, central Seoul, works as the Kospi records its fourth consecutive record high at close on May 8. [NEWS1]

Individual investors are tapping bank credit lines to buy stocks as the Kospi hits successive record highs, pushing borrowing balances at Korea's five largest banks to their highest level in more than three years.

The combined balance of personal revolving credit lines — known in Korea as minus accounts — at KB Kookmin, Shinhan, Hana, Woori and NH NongHyup banks stood at 40.5 trillion won ($27.6 billion) as of Thursday, up 715.2 billion won in just three business days from the end of April, the financial sector said Sunday.

That is the highest figure since late January 2023. The three-business-day gain in early May is also the steepest since October 2023.

Banks attribute the surge directly to the Kospi's recent rally. Fear of missing out appears to be driving individual investors to use short-term loans as investment capital, industry sources said.

Demand deposits — cash typically sitting in checking or savings accounts — have also been falling. The combined demand deposit balance at the five banks stood at 696 trillion won as of May 7, down 501.3 billion won from the end of April. That follows a decline of more than 3 trillion won in the previous month, marking two consecutive months of decreases.

"Demand for short-term liquidity for investment is growing as the stock market rally continues, with the Kospi breaking through the 7,500 mark," a representative at a commercial bank said.

"The biggest factor is the expansion of stock investment," another bank source said. "But some of the increase may also reflect demand to cover housing funding gaps with credit loans, following tighter household lending regulations introduced last year."

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.