Amid the snowballing volume of personal credit loans taken out for stock investments, Korea’s securities firms are increasingly suspending their credit financing services, local industry sources said Tuesday.
Samsung Securities, the brokerage arm of the Samsung conglomerate, announced a day earlier that it would temporarily stop the purchase of credit loans as the firm had reached its limit on credit offerings. This marked the second time since July 22 that Samsung put the brakes on its loan services.
A securities brokerage house with a net worth of 3 trillion won ($2.54 billion) or more is allowed to offer credit loans worth up to 200 percent of its equity, according to the local law governing financial investment services and capital markets.
Also starting Friday, Korea Investment & Securities stopped providing credit financing services. Other major brokerage firms such as Shinhan Investment, Mirae Asset Daewoo, KB Securities and NH Investment & Securities had already taken similar actions.
The increase in credit loans comes as retail investors attempt to profit by making stock investments. They believe the money can be used to buy shares and as the prices go up, they sell their shares to lock in profit and repay debt, industry officials said.
According to data from the Korea Financial Investment Association, the balance for credit financing reached an all-time high of nearly 17.45 trillion won as of Monday, as the amount has gradually increased on a daily basis.
By Jie Ye-eun (email@example.com