Broker borrowings up on hopes of a rebound

While the Kospi hasn’t moved much lately, there are growing expectations of an imminent rebound and investors are borrowing from brokerages to invest.

According to the Korea Financial Investment Association on Tuesday, uncleared long-term credit as of Friday reached 7.05 trillion won ($6.17 billion), the first time unsecured borrowing from brokerages has reached that level in seven months. The last time was on Aug. 24, when investors borrowed 7.03 trillion won.

At the beginning of this year, borrowings from brokerages was only 6.54 trillion won. They have grown 7.8 percent in four and a half months.

Investors’ borrowings from brokerages breaks down to 3.27 trillion won for Kospi shares and 3.78 trillion won for the tech-heavy Kosdaq.

Punters are expecting a rebound due to favorable news that has been coming in since last week.

“Last week, the earnings guidance on Samsung’s first quarter performance and an announcement on monetary policy by U.S. Federal Reserve Chairwoman Janet Yellen were both positive,” said Gwak Hyun-soo, an analyst at Shinhan Investment Corp. “While Samsung’s performance turned out to be better than the market consensus, Yellen’s remained dovish on interest rate increases. In addition, as crude prices that were hovering in the $30 range per barrel started to edge close to $40, expectations that investors will shift towards risker investments have been growing.”

Gwak predicted that the benchmark Kospi will likely reach 2,000 points within this month.

“One of the important indicators is prices for West Texas Intermediate crude, which have been edging closer to the $40 per barrel mark, which raises hope of a better global economy,” he said. “Domestically, the fact that profit momentum [of Korean companies] is rising up is also a positive.”

NH Investment and Securities analyst Lee Jun-hee said the reason the Kospi has repeatedly failed to move above 2,000 was the sluggishness of the global economy.

“But as the corporate performance momentum for the first quarter strengthens along with signs that external and internal economic indicators are recovering, the possibility of Korea’s exports recovering is growing,” Lee said.

But investors’ borrowings could be a negative if the stock market fails to improve. If stock prices fall investors, investors might go on a selling spree to pay off their debts.

In fact, while borrowing has grown nearly 8 percent since the beginning of the year, the Kospi only inched up 2.7 percent in the same period.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]