Retail investors ramp up leveraged bets as Iran conflict destabilizes markets

A board showing the KOSPI is displayed at the dealing room of Hana Bank headquarters in Seoul, Friday. The KOSPI closed at 5,584.87, up 0.97 points or 0.02 percent from the previous session. Yonhap

Kim, a 38-year-old office worker in Seoul, recently withdrew an additional 30 million won ($20,000) from his bank overdraft account to buy domestic semiconductor stocks after their prices fell sharply during market turmoil triggered by the Iran crisis.

“With market volatility rising, I saw sharp pullbacks as buying opportunities,” he said. “Deposit rates are not attractive enough, so I increased my investment exposure using leverage.”

Lee, a 45-year-old self-employed resident of Gyeonggi Province, also moved more than half of his 100 million won in maturing time deposits into a brokerage account.

“Even if deposit rates rise a bit, it is hard to grow assets meaningfully through savings alone,” Lee said. “When the stock market swings sharply, I believe there are opportunities to buy in installments, so I increased my investment funds.”

Investor appetite for leveraged bets is rising as geopolitical tensions increase in the Middle East, helping to push Korean stocks into swings exceeding 10 percent and amplifying market volatility.

As of last Thursday, the outstanding balance of overdraft accounts at the country’s five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — totaled 40.72 trillion won. The figure reflects the actual amount borrowed rather than the available credit limit.

The balance has surged by 1.3 trillion won since the end of last month, when it stood at 39.42 trillion won, with the increase occurring over just three business days.

The current level is the highest since December 2022, when the balance reached 42.05 trillion won, marking the largest amount in just over three years. At the time, ultra-low interest rates during the COVID-19 pandemic fueled a surge in leveraged home purchases and borrowing to invest in stocks.

“The recent uptick in unsecured lending at banks is largely tied to transfers into brokerage accounts,” a commercial bank official said. “When the KOSPI and Kosdaq plunged last week, daily transfers to securities firms exceeded 150 billion won, indicating that borrowing through overdraft accounts was actively used for stock purchases.”

People hold signs in support of Reza Pahlavi, son of the last shah of Iran, and U.S. President Donald Trump at a gathering in support of regime change in Iran held outside of the Westwood Federal Building in Los Angeles, California, Saturday. AFP-Yonhap

In addition, time deposits at the five major banks stood at 944 trillion won as of last Thursday, down 2.79 trillion won from the end of the previous month, highlighting that funds are increasingly flowing out of bank deposits and into equities.

Demand deposits, often regarded as idle funds waiting for investment opportunities, also shrank by 8.6 trillion won during the same period.

“Even though deposit rates have been rising along with market interest rates, deposit balances are still falling,” another bank official said. “This suggests that investors may be reallocating funds in pursuit of higher returns.”