Retail Investors Face Forced Liquidations as Stock Market Correction Deepens

The value of stocks forcibly sold by brokerage firms because retail investors failed to repay borrowed funds has surged again.

According to the Korea Financial Investment Association on Friday, July 10, the amount of outstanding margin debt, categorized as short-term "debt-financed investment," reached 1.4322 trillion won as of July 9.

This refers to funds borrowed by individuals from brokerage firms for a two-day period; if not repaid, the stocks are forcibly sold by the brokerage on the third day.

The value of stocks liquidated through such forced sales on July 9 reached 142.2 billion won.

This figure is approximately five times higher than the previous day (28.8 billion won). It is not only the highest level this month but also the highest in exactly one month since June 9 (169.8 billion won).

The total amount of forced liquidations from July 1 to July 8 was 202 billion won, meaning that 70 percent of that amount was forcibly sold in a single day on July 9.

As a result, the total value of stocks forcibly sold this month has ballooned to 344.2 billion won.

The ratio of forced liquidations to outstanding margin debt also jumped to 10.2 percent.

This is also the highest level since June 9 (10.5 percent).

An increase in forced liquidations typically occurs when the stock market experiences extreme volatility.

The KOSPI, which was at the 8,000 level on July 6, underwent a significant correction, plunging 5.44 percent and 5.99 percent on July 7 and July 8, respectively, to fall into the 7,200 range.

On July 9, the index opened with a gain of over 3 percent but saw its gains narrow, closing 0.62 percent higher.
※ Please note: This article was translated by AI and may contain errors.