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Korean brokerages halt securities-backed loans amid market ferver

Published: 03 Feb. 2026, 18:46

The Kospi and Kosdaq indexes are shown on a screen in Hana Bank's trading room in central Seoul on Feb. 3. [YONHAP]

Korean brokerages are tightening stock lending as retail investors ramp up debt-driven investment to record levels, raising concerns about overheating in an increasingly volatile market.

Korea Investment & Securities said on Tuesday it would suspend new securities-backed loans. KB Securities said it would temporarily cap loan limits from the same day. NH Investment & Securities said it would halt new loans from Wednesday and, when lending resumes, cut credit and loan limits for C-rated stocks to 50 million won ($35,000) each from 100 million won.

“Credit provision has risen quickly, leaving loan limits exhausted and forcing the restrictions,” a brokerage official said.

Korean laws allow brokerages to extend margin loans and securities-backed loans only up to 100 percent of their equity capital. Investors use such borrowing to buy stocks through brokerage firms.

As the benchmark Kospi pushed past the historic 5,000 mark, some small- and mid-sized brokerages repeatedly suspended and reopened lending services as they ran up against regulatory caps. DB Financial Investment and Daol Investment & Securities also said they had temporarily halted securities-backed loans before resuming them on Tuesday.

The surge in lending has mirrored the market’s rally. Outstanding margin loans in the domestic stock market topped 30 trillion won for the first time last Thursday, according to the Korea Financial Investment Association. The balance rose further to a record 30.47 trillion won on Monday, up 195.2 billion won, or 0.64 percent, from the previous session.

Margin loans in the Kospi alone exceeded 20 trillion won for the first time, reaching 20.98 trillion won. The figure has increased by more than 3 trillion won over the past month.

Much of the recent buying by retail investors likely involved margin trading, as borrowing climbed in step with rising stock prices. On Monday, when the Kospi fell below 5,000 as markets reacted to news of Kevin Warsh’s nomination as the next U.S. Federal Reserve chair, retail investors posted net purchases of 4.59 trillion won, the largest on record.

Customers wait in line for consultations at a brokerage firm branch in Seoul on Jan. 26, 2026. [YONHAP]

Funds sitting on the sidelines also hit an all-time high. Investor deposits surpassed 100 trillion won for the first time on Jan. 27 and climbed to 111.30 trillion won on Monday, up 5.26 trillion won, or 4.96 percent, from the previous trading day.

While borrowing can magnify gains during rallies, it can quickly amplify losses during volatile periods. Margin trading triggers forced selling when stock prices fall below required collateral levels. Falling prices can lead to collateral shortfalls, prompting automatic liquidations that put further pressure on the market.

Signs of overheating have emerged across the market. On Tuesday, the Kospi jumped 338.41 points, or 6.84 percent, to close at 5,288.08, setting a new record closing high just one day after a historic plunge that triggered a sell-side circuit breaker. The rebound proved equally sharp, activating a buy-side circuit breaker and marking the index’s largest one-day gain on record.

While expectations for further gains remain, analysts caution against aggressive buying in a volatile market.

“The 50-day deviation has exceeded the overheating threshold at 118 percent, showing that fear of missing out is intensifying rather than a healthy correction,” said Lee Eun-taek, an analyst at KB Securities. “Further gains are possible, but short-term volatility could increase. At this point, phased buying or buying after a pullback may be a better option than chasing prices.”

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.
BY PARK YU-MI [[email protected]]