As the Kospi continues its correction phase, the value of shares forcibly liquidated (forced liquidation) by securities firms due to unpaid debts by retail investors has surged back to the KRW 50 billion range.

Yesterday, the value of stocks sold off via forced liquidation among brokerage margin receivables reached KRW 59.6 billion.

Brokerage margin receivables refer to funds borrowed by individuals from securities firms for two days to invest, categorized as ultra-short-term leveraged investments.

If these amounts are not repaid within two days, the stocks are forcibly liquidated by securities firms simultaneously with the market open on the third trading day.

The KRW 59.6 billion forcibly liquidated yesterday is the largest scale since the 10th (KRW 81.6 billion), continuing in the KRW 50 billion range for the second consecutive day following the previous day (KRW 52.8 billion) the day before.

The ratio of forced liquidation to margin receivables also increased from 4.6% the day before yesterday to 5.7% yesterday.

This is five times the figure recorded on the 16th (1.1%).

Forced liquidation typically increases when the stock market experiences unpredictable volatility or a downturn, acting notably as downward pressure on the market during early trading sessions.

Yesterday, the Kospi opened 0.58% higher, then expanded its gains to close up 3.56%.

It is estimated that the stocks forcibly liquidated during early trading likely limited the extent of the market's gains.

Investor deposits, which serve as waiting funds for the stock market, were tallied at KRW 106.6929 trillion, falling back below the KRW 110 trillion mark in just one day.

This represents a decrease of KRW 5.826 trillion from the previous day.

This shows a gap of more than KRW 30 trillion compared to June 4th (KRW 139.6947 trillion), which recorded an all-time high.

The balance of credit transactions for margin loans, an indicator of leveraged investing, stood at KRW 33.5583 trillion, an increase of KRW 225.7 billion from the previous day.

While credit loan balances generally increase in a bull market, they have been on a downward trend since May 24th (KRW 38.6328 trillion) amid the recent sluggishness of the Kospi.
(Photo: Yonhap News)