Despite Record Forced Liquidations of 42.4 Billion Won, "Fearless" Investors Increase Debt-Financed Bets

On June 23, the day the KOSPI index experienced its largest-ever drop, forced liquidations (selling of stocks by brokerages to recover unpaid loans) surged to 42.4 billion won, more than double the previous trading day.

Despite the market crash, outstanding margin trading receivables actually increased by 181.6 billion won, reaching 1.4792 trillion won, while the balance of credit trading loans remained in the 38 trillion won range.

Analysts suggest that the growing scale of debt-financed investments is further exacerbating market instability.

According to the Korea Financial Investment Association, the actual amount of forced liquidations as of June 23 stood at 42.427 billion won, a 2.13-fold increase from the previous trading day.

On that day, the KOSPI index plunged by 9.99% after triggering both the sidecar and circuit breaker mechanisms.

The forced liquidations on that day involved trades initiated on June 19, when the KOSPI index had settled in the 9,000-point range for two consecutive trading days.

At that time, investors entered the market with 1.2058 trillion won in debt-financed bets, and 3.3% of those positions could not withstand the market crash on June 23.

The financial investment industry pointed out that it is concerning that forced liquidations increased alongside outstanding margin trading receivables.

On June 23, outstanding margin trading receivables rose by 181.6 billion won from the previous trading day to 1.4792 trillion won.

This is a contrasting trend to May 5, 8, and 9, when forced liquidations reached record highs while outstanding margin trading receivables decreased.

Although the absolute scale of forced liquidations is much smaller than on May 5, 8, and 9, the trend of increasing debt-financed investments despite the market crash is considered alarming.

Margin trading receivables refer to short-term loans from brokerage firms for stock investments. While investors typically only need 30–40% of the investment amount upfront, they must cover the remaining balance within three trading days.

In a crashing market, the value of stocks purchased with borrowed money falls, which can cause the margin ratio to drop below the required threshold, leading to forced liquidation.

Investors can gain more time by meeting the brokerage's margin call, but if they fail to do so, the brokerage may indiscriminately sell off the held stocks at low prices.

Large-scale forced liquidations can trigger a vicious cycle that leads to further declines in stock prices.

The balance of credit trading loans at brokerage firms also remains at an all-time high.

As of June 23, credit trading loans stood at 38.0936 trillion won, maintaining the 38 trillion won level for three consecutive trading days.

On June 22, the figure reached a record high of 38.5312 trillion won.

Reported by Kim Min-jung | Video by Ahn Jun-hyeok | Graphics by Yang Hye-min | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.