Investor deposits held at South Korean brokerages, a gauge of cash waiting to be invested in stocks, dropped back below 100 trillion won for the first time in two weeks, while money borrowed to buy shares swelled past 33 trillion won. Analysts said the combination of retail selling and shrinking deposits points to cash leaving a range-bound market, with only short-term leveraged bets on the rise.
Investor deposits stood at 98.92 trillion won on the 26th, down 3.62 trillion won from the previous session, according to the Korea Financial Investment Association on the 27th. It was the first reading below 100 trillion won since the 12th, when deposits totaled 99.98 trillion won, or nine trading sessions earlier.
Deposits have shed 40.78 trillion won, or 29.2%, in less than three months from a record 139.69 trillion won reached on June 4. The measure had rebounded to 106.58 trillion won on the 19th of this month before turning lower again. Analysts said the drop on the 26th was especially telling because retail investors sold a net 2.25 trillion won of shares on the main board that same day, suggesting the proceeds did not stay parked in brokerage accounts but left the market entirely.
Margin loan balances, or money borrowed to buy stocks, rose for a seventh consecutive session. The balance stood at 33.10 trillion won as of the 26th, up 254 billion won from the prior session. It was the first time the figure had returned to the 33 trillion won range since July 28, when it stood at 33.19 trillion won. The balance, which had fallen to 27.40 trillion won on the 4th, has jumped 5.70 trillion won in just three weeks.
Brokerage analysts said basic deposits are draining away as the index remains stuck in a narrow range, while leveraged buying concentrates in theme stocks. "When only margin loans and unsettled debts are rising at a time when the cash cushion that underpins the market is flowing out, that is a textbook warning sign on supply and demand," an official at a financial investment firm said. "If a short-term correction hits, forced liquidations from margin shortfalls could flood the market and amplify volatility."
