Individual stocks forcibly liquidated through margin calls topped 300 billion won over two trading sessions, as the KOSPI plunged. With market volatility intensifying to extreme levels, concerns are mounting over 37 trillion won in debt-fueled investment.
Margin call liquidations amounted to 139.1 billion won on Monday, the third-largest figure so far this year, according to the Korea Financial Investment Association on Tuesday. The total exceeded 100 billion won, following 166.1 billion won on Friday, and the two days combined reached 305.2 billion won. The total for this month came to 379.653 billion won.
The KOSPI plunged 5.54% on Friday and 8.29% on Monday, leading to expectations of substantial margin call liquidations on Tuesday as well. Last month, the KOSPI also fell on the 15th (-6.12%) and the 18th (-3.25%), with margin call liquidations on the 20th reaching 145.8 billion won.
The balance of margin loans, which represents debt-fueled investment, stood at 37.7904 trillion won as of Monday. After surpassing 38 trillion won for the first time on the 29th of last month, it has continued at a high level in the upper 37 trillion won range. The margin loan balance is the amount investors have borrowed from brokerages for stock investment and not yet repaid. It indicates that individual investors have taken on a significant amount of debt to invest.
In the market, voices of concern are emerging that investors' loss burdens could expand as index volatility grows. "Margin loans have relatively long maturities, but unsettled transactions have short settlement deadlines, so they are highly likely to lead directly to margin call liquidations when share prices plunge," an official in the financial investment industry said.
