An official works at a dealing room of Hana Bank in Seoul, Friday. Yonhap
The country's financial watchdog warned Monday that retail investors' overheated short-term and margin stock trading could pose risks, such as losses and increased costs, amid heightened market volatility.
The Financial Supervisory Service (FSS) said the country's stock market has been delivering a strong rally on the back of policy backups and sound corporate earnings despite increased external uncertainty caused by the Middle East conflict.
The country's benchmark Korea Composite Stock Price Index (KOSPI) has rallied by more than 75 percent so far this year following last year's 76 percent advance, becoming the best performer among major markets.
The watchdog said many market experts see the KOSPI's further advance, possibly breaching 8,000- and 9,000-point levels, backed by a boom in the semiconductor sector and ample market liquidity.
But the FSS said short-term trading by retail investors is causing amplified market volatility and they should bear increased trading costs, which could reduce their investment returns.
According to the FSS, the KOSPI's daily turnover rate stood at 1.48 percent as of April, far higher than the S&P 500's 0.22 percent and the Nikkei's 0.37 percent.
The turnover rate in stock markets, a measure of stock liquidity, is calculated by dividing the number of shares traded over a period by the average number of outstanding shares. The higher the stock turnover rate, the more liquid the shares.
Also, leveraged stock trading has been on a sharp rise with the margin lending reaching 35.7 trillion won ($24.23 billion) at the end of April, sharply up from 27.3 trillion won at the end last year, it said.
The watchdog said margin trading could lead to extended loses should stock prices fall.
Source: Korea Times News
