Forced stock sales topped 50 billion won for a fourth consecutive session on South Korea's increasingly volatile stock market. Investor deposits parked at brokerages and margin loan balances also declined, signaling weakening investor sentiment.
Forced sales triggered by unpaid settlement obligations in brokered trading totaled 57.2 billion won ($40 million) on the 16th, according to the Korea Financial Investment Association on the 19th. The figure stood at 59.3 billion won on the 13th, 89.3 billion won on the 14th and 80.5 billion won on the 15th, marking four straight sessions above 50 billion won. The KOSPI rebounded slightly on the 16th, but many investors still could not avoid liquidation. Forced sales refer to the value of positions liquidated when investors fail to meet margin requirements.
Mounting losses are draining cash waiting on the sidelines. Investor deposits fell 2.51 trillion won from the previous session to 94.40 trillion won on the 16th, the lowest since 93.93 trillion won recorded on the 7th of last month. Deposits stood at 100.44 trillion won on the 12th of this month, meaning more than 6 trillion won drained away over four sessions.
The margin loan balance, which shows how much investors have borrowed from brokerages to buy stocks, also fell. It stood at 32.25 trillion won on the 16th, down 497 billion won from the previous session and the lowest since 32.36 trillion won on the 10th of last month. With forced liquidations of unsettled trades staying elevated and margin loans shrinking, money borrowed to buy stocks is contracting.
The KOSPI fell for seven consecutive sessions from the 6th through the 15th of this month, the longest losing streak since September 2024. On the 15th, the index plunged 454.59 points, or 7.57%, to close at 5,554.22. Samsung Electronics (005930.KS) and SK hynix (000660.KS) tumbled 9.48% and 11.06%, respectively, underscoring the severity of the selloff. The index rebounded 2.05% on the 16th as foreign investors turned net buyers for the first time in nine sessions, though an intraday gain of as much as 4.6% narrowed late in the session. On the 19th, the KOSPI closed 1.76% higher at 5,768.01.
Outlooks for the market diverge. Some expect share prices to recover, citing the solid earnings power of chipmakers, while others say it is too early to call a sustained upturn given lingering credit risks in the artificial intelligence industry and pressure from foreign investor flows.
"We expect caution toward AI-related companies to weigh on sentiment for the time being," an official in the securities industry said. "Consumer goods companies and others with more stable earnings may outperform for a while."
