Forced Liquidations in South Korean Stock Market Margin Accounts Hit KRW 344.2 Billion in July
Miles Bennett
Leveraged positions in South Korean equities are unwinding fast — forced liquidations hit KRW 142.2 billion on July 9 alone, lifting the July total to KRW 344.2 billion. Retail cash has shrunk over 23% in a month, and when de-leveraging peaks is now the market's key test.
Why did forced liquidations spike fivefold in one day?
Forced selling on July 9 reached KRW 142.2 billion, up from just KRW 28.8 billion the day before — nearly a fivefold jump.
This means → KOSPI's back-to-back drops on July 7 (−4.91%) and July 8 (−5.35%), totaling over 10%, pushed collateral values in margin accounts below trigger levels.
In plain terms = South Korea settles trades on a T+2 basis — what you sell Monday settles Wednesday. So Monday-Tuesday's crash only forced margin calls on Wednesday, like a delayed detonation.
Forced liquidations rose to 10.2% of unsettled trades, breaking into double digits for the first time in a month.
What does the July 13 crash mean for the numbers ahead?
KOSPI closed at 6,806.93 on July 13, down 669 points or 8.95% — the seventh circuit-breaker halt this year.
Foreign investors net-sold KRW 1.87 trillion; institutions net-sold KRW 2.7 trillion. Retail bought a net KRW 4.5 trillion against the tide, but still could not stop the slide.
This means → because liquidation data lags by two trading days, the forced-selling figures tied to July 13's plunge have not yet been reported. The next release is almost certain to set a new high.
Where has retail money gone?
Investor deposit balances fell from KRW 139.69 trillion on June 4 to KRW 107.13 trillion on July 9 — a loss of KRW 32.57 trillion, or 23.3%, in roughly one month.
CITIC Securities International data shows retail margin balances dropped 9.4% in the past week, the largest single-week swing in a decade.
This reflects a rapid retail retreat. Yuanta Securities analyst Kim Yong-gu notes that the drop in credit financing is not all voluntary de-risking — part of the decline comes from involuntary forced liquidations, meaning some investors did not choose to leave.
How are leveraged ETFs making the sell-off worse?
Samsung Securities notes that leveraged ETFs carry a "short gamma" profile — a structural mechanism that forces them to buy when the underlying rises and sell when it falls — amplifying moves in both directions during extreme volatility.
In plain terms = the more the market drops, the more shares these ETFs must sell to rebalance. That selling pushes prices lower still — a "falling begets selling, selling begets falling" feedback loop.
"KODEX SK Hynix Single-Stock Leverage" has fallen 66.6% from its June peak; "TIGER Samsung Electronics Single-Stock Leverage" is down 60.4% — both at all-time lows since listing.
Together the two ETFs still carry a combined market cap above KRW 10 trillion. This means → the mechanical selling pressure will not vanish on its own in the near term.
When does de-leveraging pressure peak?
Daishin Securities analyst Lee Kyung-min points out that KOSPI's rally from this year's low exceeded 200% at its peak, building clear overheating risk.
Regulators ordered brokerages to tighten credit-trading risk controls on June 24, but specific measures have not yet taken effect.
Credit financing balances have eased from the June 24 peak of KRW 38.63 trillion to KRW 36.63 trillion — a decline of roughly KRW 2 trillion. But compared with the sharp drop in deposit balances, credit positions are shrinking far more slowly.
This means → de-leveraging is far from over. Whether the forced-liquidation data published later this week shows a peak is the next critical checkpoint for gauging when selling pressure eases.
Content is for reference only, not financial advice.