SEOUL, November 6 (AJP) —When a 20-minute trading halt and a five-minute curb on program selling failed to stop the KOSPI sliding past 5,000, Seoul reached for an emergency card. For three months, brokerages will be exempt from the rule that forces them to sell shares bought with borrowed money.
The KOSPI recovered about a third of its losses after the late-morning announcement. Institutions did most of the buying, while foreigners kept heading for the exit.
The benchmark index plunged more than 8 percent shortly after Friday’s opening bell, triggering the 20-minute halt and falling below 5,000 for the first time in about nine months. It closed down 6.02 percent at 5,059.65.
The measure was agreed at an emergency meeting chaired by Deputy Prime Minister and Finance Minister Lee Hyoung-il, with the heads of the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea. It takes effect Monday.
Under current rules, brokerages that lend money for stock purchases must keep collateral worth at least 140 percent of the loan. When falling prices push the ratio below that level, borrowers must put up more cash or shares. If they can’t, their holdings can be sold off.
The exemption lets brokerages lower that threshold or delay forced sales, reducing the risk of a wave of compulsory selling into a falling market. It does not stop forced sales automatically, though. How much relief borrowers get will depend on how each brokerage responds.
That risk has grown sharply this year. Forced sales of shares bought with margin loans totaled 919.34 billion won ($678.4 million) at Korea’s 10 largest securities firms in the first half of 2026, according to data submitted to lawmaker Kim Sang-hoon.
Monthly liquidations jumped from 56.51 billion won in January to 393.51 billion won in June, nearly seven times as much. These are margin-loan liquidations, the kind of forced selling the new measure directly targets.
Forced selling has also surged on unpaid stock purchases. Liquidations of unpaid purchases reached 5.15 trillion won in the first 10 months of 2026. That is roughly four times the 1.28 trillion won in the same period last year, and well above the 1.45 trillion won in 2024, according Korea Financial Investment Association (KOFIA) data.
Unlike margin-loan liquidations, which follow a fall in collateral values, these forced sales happen when investors fail to pay the full price of shares by the settlement deadline. Both add to selling pressure in a downturn, but the government’s measure covers only margin loans.
The pressure peaked during earlier selloffs this year, with unpaid-purchase liquidations reaching 169.80 billion won on June 9 and 89.34 billion won on Oct. 14. The latest figure was 8.42 billion won on Thursday, well below the October spike. It was recorded before Friday’s plunge, however.
Outstanding margin loans have fallen 25.9 percent from their June 24 peak of 38.63 trillion won to 28.64 trillion won as of Nov. 4, according to KOFIA.
The decline shows investors have cut back on borrowing, though the data do not show how much came from voluntary repayment and how much from forced sales. With 28.64 trillion won still outstanding going into Friday’s plunge, further price declines could squeeze leveraged investors hard.
Seoul has used this tool before. In 2022, it suspended the requirement from July 4 through the end of September. Mirae Asset Securities cut its collateral ratio to 130 percent from 140 percent, while Kyobo Securities and Korea Investment & Securities gave borrowers an extra day before selling. The market kept sliding anyway. The KOSPI hit its low for the year in September and ended 2022 down 24.9 percent.
The relief buys time, but it cannot stop the losses, experts say. If prices keep falling, delaying forced sales could leave borrowers facing even deeper losses.
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