Stock market instability continues into August. On the first trading day of the month, August 3, the KOSPI index fell by more than 5%, failing to maintain the surge seen on July 31. The so-called 'rollercoaster market' has heightened investor anxiety. By the end of July, both investor deposits and credit financing balances had sharply decreased. Analysts suggest that over 3 trillion won in credit financing was liquidated overnight, leading to a significant weakening of market strength.
According to the Korea Financial Investment Association, as of July 31, investor deposits (excluding trading deposits for derivatives) totaled 104.1354 trillion won. This marks a decrease of 15.9483 trillion won (13.3%) compared to early July, when deposits were at 120.8367 trillion won. Compared to the record high of 139.6948 trillion won on June 4, nearly 35.5594 trillion won (25.5%) has evaporated in less than two months, putting the 100 trillion won threshold at risk.
The liquidation of leveraged funds is also severe. As of July 31, the total balance of credit transaction financing dropped to 28.9350 trillion won, a decline of 3.2181 trillion won (10%) in just one day. The credit balance, which was 37.7922 trillion won at the beginning of July, has fallen by 8.8572 trillion won over the month, settling into the 20 trillion won range.
By market, as of July 31, 2.6681 trillion won in credit balances disappeared from the securities market in one day, while the KOSDAQ market saw a reduction of 550.1 billion won. This was a result of forced sell-offs due to increased stock price volatility and stop-loss liquidations to prevent further losses. The high-risk trading indicator, margin trading, recorded 1.6615 trillion won, with actual forced sell-off amounts reaching 122 billion won, accounting for 7.1% of the margin trading total.
With the depletion of waiting funds and credit liquidations weakening supply and demand, market volatility remains high on the first trading day of August. On this day, the KOSPI closed at 6,257.45, down 338.00 points (5.12%) from the previous trading day. Following the previous day's surge, foreign and institutional investors sold a net 2.8429 trillion won and 1.9477 trillion won, respectively. Although individual investors made a record net purchase of 4.6531 trillion won, it was insufficient to prevent the index from plummeting.
In contrast to the KOSPI, the KOSDAQ closed at 737.35, up 17.59 points (2.44%) from the previous day. The market experienced a surge, triggering the 29th buy-side circuit breaker of the year around 10:28 a.m. due to a 6.41% increase in KOSDAQ 150 futures prices.
Some analysts suggest that the ongoing market fluctuations are dampening investors' risk appetite. However, there are interpretations in the securities industry that the recent shifts in market funds cannot be solely attributed to a decline in risk preference.
Kim Min-kyu, a researcher at KB Securities, stated, "It is difficult to interpret the reduced scale of forced sell-offs in a declining market as a completion of deleveraging. The movement of existing credit investors into high-risk leveraged exchange-traded funds (ETFs) has had a significant impact." He added, "While the simple return of single-stock leveraged ETFs averages -70%, the actual trading profit and loss for individual investors is around -10%, indicating that the actual losses or liquidation amounts are not large. Considering the still high trading volume and relatively small loss magnitude, it seems that rather than a complete shift in individual investors' risk appetite, the means of leveraged investment have changed."
* This article has been translated by AI.
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