As the domestic stock market experiences sharp declines and rebounds, the burden on individual investors who borrow money to invest in stocks is increasing. In the past month, the amount of forced sales has surpassed 530 billion won, and the balance of margin trading loans has decreased by over 4 trillion won compared to its peak earlier this month. Investors who have been forced to sell their stocks during a market downturn find it difficult to recover their losses even if stock prices rebound afterward.
According to the Korea Financial Investment Association, from September 21 to October 21, the total amount of forced sales against margin trading debts was recorded at 533.682 billion won. This figure represents the total forced sales over 19 trading days during that period.
Notably, forced sales peaked in mid-October when market volatility increased. On October 14, the amount of forced sales reached 89.336 billion won, the highest in the past month. This was followed by 80.498 billion won on October 15 and 57.248 billion won on October 16, totaling 227.082 billion won in forced sales over three days.
Forced sales occur when investors fail to settle their stock purchase payments on time, leading brokerage firms to forcibly liquidate their holdings. In a declining market, investors have little control over the timing of their sales, and even if stock prices recover, they may miss out on potential gains.
The balance of margin trading loans has also decreased rapidly. As of October 21, the balance stood at 30.271 trillion won, down 2.7845 trillion won from 33.555 trillion won on September 21.
After reaching a recent high of 34.2887 trillion won on October 12, the balance of margin loans has since declined. In just nine days, it dropped by approximately 4.0177 trillion won.
However, it is important to note that not all of the decrease in margin loan balances can be attributed to forced liquidations. The balance also reflects voluntary loan repayments by investors and new loan issuances. The figures for forced sales and margin loan balances represent different metrics.
Investor deposits, which serve as standby funds in the stock market, have also decreased. As of October 21, investor deposits totaled 89.6344 trillion won, down 8.5042 trillion won from 98.1386 trillion won on September 21. In the past month, both margin loan balances and investor deposits have declined simultaneously.
A representative from the securities industry stated, "While margin trading can amplify profits during rising markets, it can lead to significant losses during downturns due to forced sales. Especially in volatile markets, investors who have been forcibly liquidated may miss recovery opportunities even if stock prices rebound, so it is crucial to manage the scale of margin trading and repayment capacity carefully."
* This article has been translated by AI.
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