On June 23, the KOSPI index recorded its largest drop ever, leading to a significant increase in forced liquidations among retail investors.
According to the Korea Financial Investment Association on June 24, the amount of margin trading debt reached 14.792 trillion won ($11.5 billion) as of June 23. This marks an increase of 1.816 trillion won from the previous trading day and is the highest level since June 10. Margin trading allows investors to buy stocks using borrowed funds from brokerage firms, and if they fail to repay within a set period, their holdings are automatically sold off.
On that day, the total amount of forced liquidations was recorded at 42.4 billion won, more than double the previous day's figure of 19.8 billion won and the highest since June 12. The proportion of forced liquidations relative to margin debt also rose to 3.3%, up from 1.6% the previous day, marking the highest level since the 4.0% recorded on June 12.
Typically, forced liquidations increase during periods of heightened market volatility. In particular, in a sharp decline, additional selling pressure can exacerbate the downward trend in stock prices.
Meanwhile, the domestic stock market recorded its largest drop ever on June 23. The KOSPI closed at 8203.84, down 910.71 points (9.99%) from the previous session, marking the largest decline in terms of points. In percentage terms, this is the biggest drop since March 4, when it fell by 12.06%.
The KOSDAQ index also faced a downturn, closing at 891.52, down 76.88 points (7.94%). This marks the first time the KOSDAQ has fallen below the 800 level since November 27 of last year, when it closed at 880.06.
Additionally, the balance of margin trading loans, which indicates the amount borrowed by investors from brokerage firms, has been on a downward trend. As of June 23, the balance stood at 38.936 trillion won, a decrease of 4.375 billion won from the previous trading day (38.531 trillion won). This follows a record high of 38.4786 trillion won on June 19, marking two consecutive days of decline.
* This article has been translated by AI.
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