Korea’s stock market saw forced liquidation amounts exceeding 324 billion won last week

South Korean won
On July 14, as recent volatility in the Korean stock market intensified, risks from leveraged trading began to surface in a concentrated manner. According to FreeSIS data from the Korea Financial Investment Association, in the week of July 6 to July 10, the actual reverse buy-sell amount by Korean securities firms for outstanding unpaid items totaled approximately 324.1B won. Compared with the average level of the previous five weeks (about 244.92B won), it was about 32% higher, making it a clearly high-pressure week. Compared with the relatively calm week of June 15 to June 19, the scale last week was about 5 times as large. From day-by-day data, the forced liquidation pressure in the Korean stock market expanded noticeably on July 9. On that day, the actual reverse buy-sell amount reached approximately 142.2B won, accounting for 10.2% of outstanding items, the highest for the week. On July 10, the figure still remained at about 81.61B won, or 5.7%. Previously, the amounts for the three trading days were 39.7B won, 31.74B won, and 28.85B won, respectively. So-called “reverse buy-sell” refers to when investors buy stocks using margin financing or unsettled funds, and if they fail to make up the funds in time, brokers forcibly sell the related stocks according to rules. This data is not the same as the number of “liquidation events,” but it can reflect the scale at which leveraged accounts are passively cleared during market declines. Analysts believe that when the stock index continues to pull back and individual stocks’ losses widen, margin accounts and short-term trading accounts are more likely to trigger additional margin calls or forced sell pressure. If market sentiment continues to weaken, reverse buy-sell activity may further amplify intraday volatility, forming a chain reaction of “downward move, forced liquidation, then another downward move.”