Forced sales of shares bought on unsettled credit reached their highest level in more than two months on the 13th, when the KOSPI plunged more than 5%. With investor sentiment weakened by the recent market slide, the margin loan balance also topped 34 trillion won, raising concerns about additional forced selling.
Brokerages liquidated 59.35 billion won ($41 million) worth of shares against unpaid settlement obligations the previous day, according to the Korea Financial Investment Association on the 14th. That was the largest amount since July 31, when the figure reached 122.012 billion won, and the fifth-highest so far this year. Forced sales accounted for 5.6% of outstanding unsettled receivables.
A forced sale occurs when an investor fails to pay for shares purchased on unsettled credit within the deadline, prompting the brokerage to liquidate the holdings. When share prices fall sharply, selling the shares may not cover the unpaid balance. Still, the figures recorded on the 13th relate to settlement conditions from earlier trading sessions, making it difficult to attribute them directly to that day's KOSPI plunge.
Funds parked around the stock market also showed signs of strain. Investor deposits at brokerages stood at 100.0983 trillion won on the 13th, down 4.5661 trillion won from 104.6644 trillion won on the 12th. The margin loan balance, which shows how much investors have borrowed to buy stocks, was 34.2529 trillion won. It has stayed above 34 trillion won since the 12th, near the highest level since July 15.
The domestic market tumbled the previous day. The KOSPI closed at 6,035.35 on the 13th, down 5.46%. It fell as low as 5,911.11 during the session, breaking below the 6,000 mark for the first time in about two and a half months. Samsung Electronics (005930.KS) and SK hynix (000660.KS) dropped 7.39% and 10.09%, respectively. The declines came as China's ChangXin Memory Technologies (CXMT) announced plans to launch server DRAM chips and concerns mounted over funding for artificial intelligence investments.
The KOSPI failed to rebound on the 14th, falling for a sixth consecutive session. It was the first losing streak of six sessions or more since the index fell for seven straight sessions from Sept. 3 to 11, 2024. The KOSPI ended at 6,008.81, down 26.54 points, or 0.44%, from the previous session, according to the Korea Exchange. The index rose as high as 6,190.65 early in the session before sliding to 5,944.65 and dipping below 6,000. It narrowed losses late in the day to barely hold the 6,000 level.
Caution ahead of the U.S. consumer price index release and rising international oil prices also weighed on the market. Dutch chip equipment maker ASML posted third-quarter net profit above market estimates but revenue slightly below expectations. Its shares weakened after the earnings release, affecting sentiment toward domestic chip stocks. Lee Kyoung-min, an analyst at Daishin Securities (003540.KS), said gains were capped by rising international oil prices, weak AI momentum and caution ahead of the U.S. CPI release.
