'I couldn't breathe':South Korea's frenzied stock trading exposes margin loan risks

SEOUL, July 20 (Reuters) - Lee Seung-ho watched the astir 300 cardinal won ($202,515) banal trading luck helium built with a 500% borderline indebtedness evaporate successful conscionable 4 weeks successful May, but helium plans to get again and instrumentality to the marketplace the infinitesimal helium has ‌enough capital.

The 24-year-old South Korean assemblage pupil successful Seoul concisely turned the 20 cardinal won helium saved during mandatory subject work into a 15-fold ‌windfall, each by tapping a "tiny ellipse button" connected his trading app that instantly unlocked five-times leverage.

Then the marketplace turned.

Violent swings successful South Korean stocks triggered a cascade of forced liquidations by his ​brokerage, wiping retired the gains. Within weeks, his relationship had fallen beneath his archetypal investment, leaving him nether specified strain that helium said: "I virtually could not breathe."

"But I'm sticking to borderline loans," Lee said from his workplace apartment, hardly larger than a parking space, adjacent to an bare Hibiki whisky and an unboxed electrical instrumentality talented by his brokerage aft helium qualified arsenic a VIP client.

Lee's quality to instrumentality connected a 500% borderline loan, and the spectacular boom-and-bust that followed, captures the risks astatine ‌the bosom of South Korea's profoundly leveraged retail investing civilization - ⁠a inclination that has regulators frantically sounding the alarm to incorporate what they spot arsenic an progressively unsafe trading frenzy.

The Kospi, which precocious reigned arsenic the world's best-performing banal scale aft much than doubling successful conscionable six months, has since lurched ⁠violently, plunging much than 10% respective times successful a substance of weeks.

For galore young South Koreans, the allure of leverage is rooted successful a harsher world beyond the trading screen. With Seoul flat prices averaging astir 14 years' worthy of salary, young graduates consciousness locked retired of accepted wealthiness accumulation, leaving the high-leverage banal app arsenic their lone economical ​equalizer.

"Since ​stocks are volatile assets, that volatility, if it moves upward, allows for accelerated wealthiness creation," ​Lee said. "If I adhd 5 times leverage, I tin physique ‌wealth 5 times faster than others," helium added, erstwhile asked wherefore helium would instrumentality connected much indebtedness contempt the accent helium had endured.

Lee's eventual extremity is to bargain an flat successful Seoul, hopefully earlier helium tin beryllium happily joined with "a lad and a daughter, 1 day."

'POLICY ERROR'

According to the Korea Financial Investment Association, borderline indebtedness balances successful the home banal marketplace reached 38.63 trillion won connected June 24, the highest level connected record. As of July 15, balances were 34.37 trillion won.