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Korean investors less concerned about risk

Nov 13,2019
Korean investors’ appetite for risky assets is increasingly tipped to grow, with loans to buy stocks and cash inflows into stock funds rising amid improved market confidence over progress in the U.S.-China trade dispute, data showed Tuesday.

The daily average margin loans for both the Kospi and the secondary Kosdaq amounted to about 9.2 trillion won ($7.9 billion) as of Thursday, the highest since early August, according to the Korea Financial Investment Association.

Investors, mostly individuals, generally take out loans from brokerage houses to invest in stocks on expectations of a bull run. The margin loans plunged to below the 9 trillion won mark in August, when the U.S.-China trade tussle peaked, with the world’s two largest economies engaged in a tit-for-tat tariff war.

But recently, the dispute has been showing signs of easing, with the two set to sign a small-scale deal, although there are still uncertainties over it, prodding investors to increase their exposure to stocks. On Friday, U.S. President Donald Trump said that the United States has not agreed to roll back some of the tariffs it has imposed on Chinese goods, adding to worries about the trade war between the world’s two largest economies.
“With the upcoming U.S. presidential election in 2020, the Trump administration seems inclined to have a small deal in order to restore the trade-war-hit manufacturing industry,” said Noh Dong-gil, an analyst at NH Investment & Securities.

Investment in high-yield assets is also on the rise. In the one-month period to Thursday, stock funds soaked up about 320 billion won, while domestic bonds funds posted a net outflow of 915 billion won. A money shift from bonds to stocks is considered a signal of an upturn in the stock market.

The Kospi, having hit as low as 1,891.81 points in August this year, has stayed above the 2,100 mark since Nov. 4, largely buoyed by the Bank of Korea’s third key rate cut this year.

Yonhap