Young people’s ‘debt investment’ exceeds 38 trillion won in the first half

기사입력 : 2021-10-05 09:37

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Hana Bank's dealing room electronic display board in Seoul, South Korea September 29. Photo=REUTERS
In the first half of this year, young people in their 10s and 30s borrowed more than 38 trillion won of credit loans from securities firms to invest in stocks. Concerns are rising that if stock prices decrease, young people who have invested in debt can suffer from significant losses.

According to the report received by Justice Party lawmaker Jang Hye-young of the the National Assembly's Strategy and Finance Committee from the Financial Supervisory Service on the 3rd, securities firms' new loans amounted to 185.8654 trillion won in the first half of this year. Among them, the amount of new loans from young people in their 10s and 30s was 38.7453 trillion won, accounting for 67% of a total loan borrowed by young people (57.0639 trillion won) last year. If the current trend continues, it is expected that the loan amount will surpass last year's by the end of this year. As of the end of June, the new collateral loans of young people also amounted to 3.5 trillion won.

It is analyzed that the number of young people taking out a loan to invest in stocks has increased sharply as it has become easier to raise funds at low-interest rates since COVID-19 and asset prices also rise. 11.72 million out of the 21.15 million of newly opened securities accounts this year were accounts for young people, accounting for about 55%. Also, young people's account balance in the first half of this year was 141 trillion won, more than doubling from the end of 2019 (57 trillion won).

However, ‘debt investment’ always has a risk. The annual interest rate on credit loans of securities firms is 4~8% depending on the loan period and collateral loans is 7~9%. In case of taking out loans to invest in stock, profits from rising stock price are limited and losses can be incurred more if stock prices decrease. Also in the case of credit loans, securities firms can arbitrarily dispose of borrowers’ stocks if stock prices fall below the collateral ratio (about 140%). The lawmaker Jang said, “If young people with relatively low income and assets compared to other generations make excessive debt to invest in stocks, their actual lives can be affected by the fluctuations in the asset market.”


By Global Economic Reporter Do-hee Lee ; translate by Gounee Yang