By Yoon Ja-young
Staff Reporter
If Japan has its Mrs. Watanabes, then Korea has its Mrs. Kims. An increasing number of small investors, including housewives, are joining the foreign exchange (FX) margin trade as exchange rates fluctuate.
Mrs. Watanabe refers to Japanese housewives, engaged in foreign currency trading. They sought investment opportunities in overseas markets when the country had a zero percent interest rate.
FX margin trade is a kind of foreign exchange futures trade, in which investors buy and sell currencies on a certain amount of margin. It has been drawing attention from individual investors looking at high-risk, high-returns, as the exchange rate has been highly volatile recently.
According to the Korea Futures Association, the number of FX margin trade contracts averages 13,174 a day, growing over six times compared with 2007. The money transacted averaged $63.2 billion a month, four times bigger than the previous year. The association said that laymen are increasingly participating in the trade. Anybody can start FX margin trade through home trading systems (HTS) offered by futures companies.
Some are learning investment techniques at private institutes. Edu FOREX, a private institute offering courses on foreign exchange trading, said it saw the number of students increase recently. ``The class consists of a wide range of people. There are housewives, college students, those in their 30s or 40s, or those who have retired from jobs, and some people who have sent children abroad to study,'' said a spokeswoman at the institute. They have one thing in common ― they all have more knowledge and interest in financial investment compared with others.
They attend the class and do FX margin trades, whether mock or real, and analyze financial news and economic indices with the help of tutors, who are former foreign exchange dealers.
The spokeswoman said that one needs knowledge on futures and currency options to start FX margin trading, adding that the institute doesn't recommend people with little cash to engage in such trades, as their accounts can get liquidated if the investors bet in the wrong direction.
It is very risky as the trade allows leveraging up to around 50 times of the margin. For example, one can trade $100,000 worth by depositing only a $2,000 margin. Meanwhile, a one percent fall or rise of the foreign exchange rate in the opposite direction of the bet would incur a 50 percent loss.
``It is difficult for experts to forecast the direction of the foreign exchange rate. Individual investors would have to be very careful,'' a foreign exchange dealer said.