The stock market has plummeted to the mid-5,000s, deepening the concerns of individual investors. Those who borrowed to invest in stocks are now facing fears of forced liquidation. The margin loan balance has exceeded 33 trillion won, with daily forced liquidation amounts nearing 90 billion won. There are growing worries about a vicious cycle where falling stock prices lead to forced liquidations, which in turn drive prices down further.
According to the Korea Financial Investment Association, as of October 14, the total margin loan balance in the KOSPI and KOSDAQ markets was recorded at 33.7 trillion won. After peaking at over 38 trillion won in June, the balance dropped to the 27 trillion won range in early August but has since increased, recovering to over 34 trillion won by October 12. Although the balance slightly decreased on the 14th, it remains at a high level.
As the stock market continues to decline, fears of forced liquidation among investors are escalating. The KOSPI, which started the month above 6,900, has been on a downward trend since October 6. On the 14th, it fell by over 7% during trading, dropping to the 5,500 range. When stock prices fall, the collateral value of stocks used for margin loans also decreases. If the collateral ratio falls below the standards set by brokerage firms, investors must provide additional collateral. Failure to do so may result in forced liquidation of their holdings.
The scale of forced liquidations is rapidly increasing. The amount of forced liquidation, which was around 6.4 billion won on October 8, rose to 27.1 billion won on the 12th and 59.4 billion won on the 13th, reaching 89.3 billion won on the 14th. This marks an increase of approximately 78.4 billion won compared to a month ago on September 14 (10.9 billion won), representing a 719% increase. The proportion of forced liquidation amounts within the total margin loans also rose from 1.1% to 7.2% during the same period, an increase of 6.1 percentage points.
Additionally, the margin debt from entrusted trading is also on the rise. As of October 14, the margin debt stood at 1.3575 trillion won, up 9.3% from 1.2415 trillion won on the previous trading day, October 13. The margin debt, which had been below 1 trillion won on October 7 and 8 (931.6 billion won and 991.5 billion won, respectively), has surpassed 1 trillion won this week and continues to increase. Margin debt refers to the amount that investors owe for stocks purchased but not yet paid for by the settlement date. If the amount is not repaid within the deadline, brokerage firms can forcibly liquidate the stocks in question.
A representative from the financial investment industry stated, "As the domestic stock market experiences a sharp decline, investor anxiety is also growing. It is essential to manage investment sizes within manageable levels to reduce risk exposure."
Amid the stock market's sharp decline, inverse products betting on falling stock prices saw double-digit gains across the board. The 'SOL SK Hynix Futures Single Stock Inverse 2X' surged by 21.36%, leading the day's gains. Other notable performers included 'PLUS Samsung Electronics Futures Single Stock Inverse 2X' (20.34%), 'TIGER 200 Futures Inverse 2X' (16.67%), 'PLUS 200 Futures Inverse 2X' (16.49%), and 'RISE 200 Futures Inverse 2X' (16.00%), all showing significant increases.
* This article has been translated by AI.
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