Seoul: South Korea's margin loan balance reached an all-time high this week, data showed Friday, as investors turned to leveraging to cash in on the stock market's recent bull run.

According to Yonhap News Agency, the country's margin loan balance stood at 25.8 trillion won (US$17.8 billion) as of Wednesday, surpassing the previous high of 25.7 trillion won recorded on September 13, 2021, according to data from the Korea Financial Investment Association (KOFIA).

The figure grew by more than 2 trillion won over the past month, as the margin loan balance was at 23.5 trillion won at the end of September. A margin loan is a type of secured loan offered by brokerages that allows investors to borrow against the value of their securities.

The use of this investment practice often increases when the stock market is performing well, as it allows investors to purchase more stocks than they can with their own money. However, it can also amplify risks, especially during market downturns, as the value of the collateral may fall below the amount borrowed.

When the value of securities drops below a certain threshold, brokers issue a "margin call" and can sell off the investor's positions, often at market lows, to reduce risk. Amid a rise in the margin balance, South Korea's main bourse operator, the Korea Exchange, and KOFIA issued a warning last month, advising investors to refrain from leveraged bets that exceed their affordability.

South Korea's benchmark stock gauge, the Korea Composite Stock Price Index (KOSPI), has risen by more than 60 percent since the start of this year but fell by over 2 percent earlier this week amid concerns about overvaluation in the artificial intelligence (AI) sector.