South Korea’s blistering stock-market rally accelerated in early May, triggering a wave of leveraged betting by retail investors eager to avoid missing further gains.
Outstanding balances on personal overdraft accounts at the country’s five largest commercial banks reached $29.5 billion on May 7, up about $520 million from the end of April after just three trading days, according to financial-industry data released May 10.
The sharp increase marks the highest level since January 2023 and reflects mounting risk appetite among individual investors as the benchmark Kospi index powers higher.
Bankers and analysts say the speed of the increase is especially striking. The jump recorded during the opening days of May was the largest short-term rise since October 2023, signaling that retail traders are increasingly turning to short-term borrowing to finance stock purchases.
The Kospi recently climbed above the 7500 level, fueling a sense among retail investors that staying out of the market could mean missing out on substantial gains. The fear of missing out, or FOMO, has become a major driver of trading activity, with many investors tapping overdraft credit lines for quick access to cash.
At the same time, money is flowing out of traditional bank deposits and into equities.
Demand deposits at the five major banks totaled about $507 billion on May 7, down roughly $365 million from the end of April. The decline followed withdrawals of approximately $2.4 billion during April, extending a broader shift of idle cash into the stock market.
Commercial banks say the stock rally has clearly reshaped retail-investor behavior.
“After the sharp rise in the Kospi, we are seeing a noticeable increase in retail investors using short-term liquidity products such as overdraft accounts to expand equity investments,” one banking official said.
Bankers also cited tighter mortgage-lending regulations introduced last year as an additional factor behind the increase in unsecured borrowing. As access to home loans became more restrictive, some consumers appear to have turned to personal credit lines to supplement housing and living expenses, indirectly boosting overdraft balances.
The rapid buildup in retail leverage is raising concerns that households could become increasingly vulnerable if market momentum weakens or volatility returns.
