KOSPI Composite Index CFD balances hit an all-time high as securities firms flash leverage warnings [fn Market Watch]

[The Financial News] As the KOSPI Composite Index extended its record-setting rally, aggressive institutional bets also surged, pushing Contract for Difference (CFD) balances to an all-time high. With leveraged bets jumping sharply, especially on major semiconductor stocks such as Samsung Electronics and SK hynix, securities firms have begun tightening risk controls, including new purchase restrictions and higher margin requirements. Market watchers say the influx of leveraged funds into the rally is also increasing the potential risks for brokerages.
According to the financial investment industry on the 27th, CFD balances including margin stood at 3.4177 trillion won as of the 23rd, the highest level on record. That was up by more than 420 billion won from 2.9902 trillion won at the start of the year. Compared with 1.6888 trillion won on April 23 last year, the figure has roughly doubled.
CFD is a high-risk leveraged product that settles only the difference in price movements without actually holding the underlying asset. It is mainly traded by professional investors, allowing large positions with relatively small margins. Individual investors can also participate if they meet certain requirements. Even so, institutional investors still account for the overwhelming share of the market.
So far this year, CFD funds that had been concentrated in KOSDAQ have been rapidly shifting toward large-cap KOSPI stocks. On January 2, the CFD balance in the KOSPI Market stood at 1.1887 trillion won, below the KOSDAQ market's 1.2393 trillion won. But as of the 23rd, the KOSPI Market CFD balance had risen to 1.3633 trillion won, surpassing the KOSDAQ CFD balance of 764.3 billion won. CFD exposure to overseas investments has also grown quickly. After jumping from 502.7 billion won on April 23 last year to 878.6 billion won at the start of this year, the balance reached 1.2944 trillion won on the 23rd.
In particular, CFD trading has surged around major semiconductor stocks. Samsung Electronics' CFD balance rose from 40.3 billion won on January 2 to 162.8 billion won on the 23rd, while SK hynix's balance increased from 70 billion won to 174.7 billion won over the same period. The continued rise in the KOSPI Composite Index appears to have drawn in institutional funds and wealthy investors alike, fueling leveraged trading. Market participants also say aggressive bets using leverage are becoming more common than simple spot purchases.
As overheating concerns mount, securities firms have moved to impose restrictions one after another. KB Securities suspended new CFD purchases of SK hynix on the 21st, taking preemptive action to manage risk as CFD trading became overly concentrated in certain stocks.
Mirae Asset Securities also sharply raised margin requirements and adjusted stock classifications for some names, including Alteogen, HYBE, Kakao, KEPCO, POSCO Future M, Daeduck Electronics, and G2Power. Stocks classified as high risk are subject to restrictions on new margin loans and extensions.
Mirae Asset Securities explained, "For stocks requiring 100% margin or classified as F-grade, new margin loans and maturity extensions are restricted," adding that the move was "for investor protection and risk management."
Toss Securities also raised margin requirements to 100% for EcoPro HN, Caregen, Vitzrocell, and Green Resource. Kakao Pay Securities likewise halted all new margin purchases, citing the exhaustion of its credit line. In a rising market, CFD inflows can add momentum to stock gains, but there are also concerns that if volatility expands, forced liquidation of leveraged positions could amplify market shocks.
There is also growing concern that the sharp rise in CFD balances could pose risks not only to investors but also to securities firms. That is because if customers incur losses, brokerages may have to bear the burden of hedging the opposite position and covering unpaid receivables. If a stock heavily concentrated in one direction suddenly falls, a wave of forced selling could hit the market all at once, increasing losses for brokerages as well.
In fact, after the sharp market slump triggered by Societe Generale Securities Korea in 2023, the securities industry significantly tightened its CFD exposure management standards. At the time, leveraged buying and forced selling in some stocks triggered a chain reaction that sharply increased market volatility.
khj91@fnnews.com Kim Hyun-jung Reporter