The financing of retail investors in South Korea has surged, and the leverage ratio has dropped to a low level.

The data seen in the morning shows that the loan balance of retail financing accounts in South Korea has approached 26 billion US dollars, reaching a historic high.

In absolute terms, the scale of borrowing by South Korean investors through financing accounts to buy stocks has reached a historically high territory.

However, another set of data indicates that the proportion of financing loans to the free float market value in South Korea is currently only about 0.8%.

This ratio is expected to be around 1.3% in 2025, while it was once close to 1.5% to 1.7% between 2021 and 2022. In other words, the absolute amount of financing balance has reached a new high, but the proportion of financing balance relative to the free float market value in South Korea has instead dropped to a lower position in recent years.

The key aspect of this data is that two changes are occurring simultaneously.

First, the financing balance reaching a historical high indicates that the absolute scale of financing purchases in the South Korean market has significantly expanded.

Second, the proportion of financing to the free float market value is decreasing, indicating that the expansion rate of the free float market value in South Korea is faster than that of the financing balance.

In simpler terms, South Korean investors are indeed borrowing more money to buy stocks, but the free float market value of the South Korean stock market is increasing even faster.

The record absolute financing balance shows that retail financing purchases are indeed very active.

The decrease in the financing proportion indicates that after the overall expansion of the South Korean market, the weight of this financing in the market has actually decreased.

This also means that while the heat of the South Korean stock market is indeed high, the financing data itself has not shown the kind of extreme congestion relative to market size as seen in the past.

When compared with the United States and China, the data in South Korea becomes even more evident.

The financing balance in the United States has exceeded 1.4 trillion US dollars, an absolute high, but the financing balance accounts for about 1.8% to 1.9% of the total market value. This ratio is not considered historically extreme and is closer to the long-term average level.

The situation in the United States shows that while the financing amount itself is large, the total market value of the US stock market is also very large, so the relative leverage does not appear as exaggerated as the absolute amount suggests.

The financing balance of China's A-shares also surged to 2.29 trillion yuan last year, topping the 2015 high, but the financing balance accounted for about 2.3% of the free float market value, significantly lower than the 4.7% peak during 2015.

Currently, South Korea's financing balance is about 26 billion US dollars, reaching a historic high in absolute terms, but the financing constitutes only about 0.8% of the free float market value.

In comparison, the United States has a record absolute amount with a relative market value close to the long-term average, China has a record high absolute amount with a relative proportion lower than that of 2015, and South Korea has a record absolute amount but a relative proportion lower than both the United States and China.

Therefore, South Korea now seems to have an increase in market heat, but it has not yet turned into a situation fully supported by financing.

Retail financing is indeed increasing, but the weight of financing in the overall market is not heavy. Compared to the United States and China, the current market leverage pressure in South Korea is actually lower, at least from the perspective of financing proportion, indicating that the market structure remains relatively healthy.

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