Household Debt Rises in Taiwan as Investors Borrow To Buy Stocks
As Taiwan’s stock market soars to ever-increasing new highs, more investors are turning to loans and credit to buy stocks. Over the past decade, personal loans have increased significantly, with one in five people now carrying debt. Financial analysts warn this could expose households to risk if the markets turn.
REPORTER:
For many in Taiwan, checking the stock market is the first thing they do in the morning. And for many younger Taiwanese, investing has become easier than ever.
REPORTER:
Since 2020, investors have been able to buy single shares instead of needing enough money for a full trading lot of 1000 shares. But that lower barrier to entry is also fueling a rapid rise in personal debt.
VOXPOP:
My credit debt is currently [US$79,000].
The bank called to ask if I needed a loan.
The interest rate was acceptable to me.
VOXPOP:
Some of my friends or family members are borrowing money to invest because the stock market has been doing well lately.
REPORTER:
Over the past 10 years, the average amount of personal loans increased from 92,000 US dollars to 150,000 US dollars. On average, 1 in every 5 people in Taiwan has debt.
REPORTER:
I think the stock market is doing well right now so people may consider borrowing money and using that cash [to make money]. But personally, I'm a bit conservative. I’m worried about buying at a high point and it suddenly dropping.
REPORTER:
With Taiwan’s stock market continuing to hit new highs, some younger investors are now putting money meant for home down payments into stocks instead. And there are some people combining mortgages, stock financing, car loans, and consumer credit all at once.
Li Tong-rong (REAL ESTATE TREND EXPERT):
The practice of having [all four types of debt] has turned our housing market from a residential activity into a leveraged activity used in the stock market. This means that in the stock market there's now more than [US$31.7 billion] in funds flowing in and out every day. How much of this money is borrowed?
REPORTER:
Experts warn this strategy carries major financial risks if markets suddenly fall. Some investors may be forced to sell stocks quickly, while also struggling with mortgage or loan payments. They are urging investors to manage risk and avoid excessive borrowing.
