The domestic stock market experienced a steep upward trajectory until reaching an all-time high in June. This surge led to a rise in leveraged investments, known as '빚투' (debt investment). While the situation would have been manageable had stock prices continued to rise, the reality is that no stock can keep climbing indefinitely. Those who engaged in leveraged investments at peak prices are now facing forced liquidations in a declining market.
On September 1, data submitted by the office of lawmaker Kang Jun-hyun from the Democratic Party revealed the severity of leveraged investments this year. In just seven months, the total amount of forced liquidations approached last year's annual total, indicating that leveraged investments have surpassed a critical threshold. The extreme market volatility has led to a significant number of margin calls, which typically result in forced liquidations. This means that many individual investors have been compelled to liquidate their holdings without the opportunity to benefit from any stock rebounds.
Forced Liquidation Occurs with Insufficient Collateral
According to the data from Kang Jun-hyun's office, from January to July this year, there were a total of 688,894 accounts that faced margin calls due to insufficient collateral. During this period, the total collateral shortfall reached 5.126 trillion won, which is 1.8 times higher than last year's annual figure of 2.8665 trillion won.
While the number of accounts facing margin calls this year is lower than last year's total of 767,173, the amount of collateral shortfall in just seven months has significantly exceeded last year's total. This increase in collateral shortfall is attributed to heightened market volatility, which has led to larger shortfalls that individual investors must cover.
Moreover, the ratio of margin calls that resulted in forced liquidations has also risen sharply this year. The percentage of actual forced liquidations compared to the total margin call amount from margin trading and collateral loans stands at 94.01%. The total amount of forced liquidations this year has reached 4.819 trillion won.
This figure represents an increase of 8.04 percentage points from last year's rate of 85.97%. In contrast, the rates for the previous four years ranged from 40% to 50%, indicating that this year, nearly all instances of collateral shortfall have led to forced liquidations.
Most Margin Calls Affect Investors in Their 50s; 40s Face Highest Losses
By age group, investors in their 50s experienced the highest number of margin calls. In the first half of this year, there were 125,558 accounts in this age group facing margin calls due to insufficient collateral. This was followed by 98,426 accounts in their 60s and 89,333 accounts in their 40s.
The total collateral shortfall was also highest among those in their 50s, amounting to 819.9 billion won. Investors in their 40s faced a shortfall of 615.8 billion won, while those in their 60s had a shortfall of 585.1 billion won. The number of accounts that were completely liquidated, resulting in total loss of principal, was highest among investors in their 40s, with 1,682 accounts. This was followed by 1,426 accounts in their 50s and 1,345 accounts in their 30s. The total liquidation amount was also highest for those in their 40s, reaching 11.2 billion won.
The trend of older investors facing losses is also notable. The number of accounts liquidated with total loss of principal among those in their 60s increased from 169 in the first half of last year to 553 in the same period this year, more than tripling. Similarly, the number of accounts liquidated among those aged 70 and above rose from 43 to 155 during the same timeframe.
Kang Jun-hyun stated, “The significant forced liquidations among investors in their 50s is a warning sign that should be closely monitored. This age group is typically preparing for retirement and managing their retirement funds, so the impact of substantial leveraged investment losses on household finances can be significant.” He added, “Given that the risk profiles vary by age and investment size, financial authorities must analyze these trends carefully and ensure that there are no vulnerabilities in investor protection.”
High-Value Liquidations Nearly Triple
There has also been a rapid increase in forced liquidations among high-value investors. In the first half of this year, there were 4,270 accounts with forced liquidations exceeding 100 million won, nearly tripling from 1,458 accounts in the first half of last year. Compared to the second half of last year, which had 1,858 accounts, this represents more than double the amount.
A similar trend is observed in credit transactions and collateral securities loans. The number of accounts with forced liquidations exceeding 100 million won rose from 538 in the first half of last year to 1,541 in the first half of this year, also nearly tripling. Compared to the 501 accounts in the second half of last year, the increase is even more pronounced.
Kang Jun-hyun emphasized, “The fact that the number of accounts with forced liquidations exceeding 100 million won has nearly tripled in a year indicates that the risks associated with high-leverage investments are growing. It is crucial to ensure that investors are fully aware of the risks associated with margin and credit trading, and that brokerage firms are effectively managing and communicating these risks.”
* This article has been translated by AI.
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