Stampede closing! Lee Jae-myung’s latest statement: South Korea takes urgent action! At least 320,000 retail investors lost all their money in 10 days
Korean stocks are facing another major change! According to the Korea Herald, the Korean securities industry has reached a consensus and plans to increase the minimum margin threshold for single-share leveraged ETFs from 10 million won to 50 million won to curb excessive leverage by retail investors and slow down its concentrated impact on closing flows. When South Korean President Lee Jae-myung presided over the second round of work reports of various government departments at the Blue House of the Presidential Palace today, he admitted that due to the unprecedented short-term surge, the Korean stock market is quite unstable, and it will take time and certain fluctuations to stabilize.
Korean stocks are facing another major change! According to the Korea Herald, the Korean securities industry has reached a consensus and plans to increase the minimum margin threshold for single-share leveraged ETFs from 10 million won to 50 million won to curb excessive leverage by retail investors and slow down its concentrated impact on closing flows. When South Korean President Lee Jae-myung presided over the second round of work reports of various government departments at the Blue House of the Presidential Palace today, he admitted that due to the unprecedented short-term surge, the Korean stock market is quite unstable, and it will take time and certain fluctuations to stabilize. According to relevant financial regulatory data in South Korea, in just 10 days from July 1 to 10, the amount of positions that were forced to be liquidated by securities firms due to inability to replenish margins in time was as high as 425.8 billion won (approximately RMB 1.93 billion). It is estimated that 320,000 to 460,000 retail margin accounts were liquidated in full, and their principals were completely cleared. The minimum margin threshold will be increased The Korea Financial Investment Association convened an emergency meeting of CEOs of major securities firms on Tuesday to review the market conditions of the above-mentioned leveraged ETFs and discuss industry self-regulatory measures. Participating institutions agreed in principle to raise the minimum margin threshold to curb excessive leverage by retail investors. The plan plans to increase the requirement from 10 million won (approximately US$6,700) to 50 million won (approximately US$33,500). This move directly addresses recent market concerns about Samsung Electronics and SK Hynix Leveraged Funds exacerbating stock market volatility. The relevant products have only been on the market for two months, and have aroused high alertness from regulators and the industry. The Korea Capital Market Research Institute estimates that since their listing in May, the daily rebalancing transactions of the above-mentioned ETFs have reached 700 billion to 2.1 trillion won, causing a concentrated impact on market liquidity near the closing period. It is reported that the meeting reached a principled consensus that the industry plans to promote rectification in three directions: First, the minimum margin requirement is raised from 10 million won to 50 million won to raise the threshold for retail investors to participate; Second, introduce more targeted risk warnings based on investor age and portfolio status; Third, expand investor education to help buyers better understand the product structure and potential risks. Huatai Securities said that the Korean stock market leverage is divided into two major links: one is the underlying leverage for financial institutions to export investment funds, and the other is the transaction leverage for funds to purchase leveraged financial products. The two levels of risk will amplify each other and accumulate multipliers, and the risk in the double leverage link is the weakest. At this stage, the core of market pressure is concentrated on leveraged ETFs, options and other instruments. The dual leverage on the capital side and product side is superimposed, resulting in higher risks. Over 320,000 investors lost all their money South Korea’s capital market risks have been exposed again. Data released by the Korea Financial Investment Association on the 14th showed that from July 1st to 10th, South Korean brokerages triggered forced liquidation due to the failure of customer transactions to settle on schedule, involving a total stock size of 425.8 billion won, equivalent to US$284.9 million. Among them, the liquidation pressure was concentrated on July 9. The amount of forced liquidation on that day was 142.2 billion won (about 95.2 million U.S. dollars). The proportion of single-day liquidation in all unsettled targets rose to 10.2%, setting a new high after 10.5% on June 9. Immediately afterwards on July 10, the market once again saw 81.6 billion won (approximately US$54.6 million) in discount selling, and related stocks were sold below the market price. This also exposed that South Korea's financing and trading mechanism can easily trigger a fatal chain reaction under a sharp market correction: after the market value of the account continues to shrink, the margin gap quickly appears, and the brokerage firm immediately executes forced selling operations in batches, further depressing the price of individual stocks, and then forcing more leveraged accounts to touch the liquidation line, forming a vicious circle. During this liquidation wave, approximately 320,000 to 460,000 retail margin accounts were forced to liquidate in full. Investors lost all their principal, and many retail investors ended up with debts. Although the Korean stock market was strong in the first half of the year and the index rose at an attractive rate, this outstanding report card has become a "profit illusion" for most retail investors. Data analysis reveals a cruel fact: Among the popular stocks that individual investors have bought the most, more than 70% of retail investors are losing money.
Today, South Korea's stock market has surged again, and future fluctuations may still be large. Many securities analysts pointed out that the valuation of the Korea Composite Stock Price Index (KOSPI) has fallen to historical lows, but due to the lack of catalysts to boost market sentiment in the short term, the market will still face volatility. Data shows that KOSPI's expected price-to-earnings ratio (PER) for the next 12 months is expected to be more than 5 times. This is not only lower than levels during the international financial crisis, but also lower than the lows reached in March after the outbreak of the Iran conflict. The semiconductor super cycle has undoubtedly provided strong support for valuations. (
Today, South Korea's stock market has surged again, and future fluctuations may still be large. Many securities analysts pointed out that the valuation of the Korea Composite Stock Price Index (KOSPI) has fallen to historical lows, but due to the lack of catalysts to boost market sentiment in the short term, the market will still face volatility. Data shows that KOSPI's expected price-to-earnings ratio (PER) for the next 12 months is expected to be more than 5 times. This is not only lower than levels during the international financial crisis, but also lower than the lows reached in March after the outbreak of the Iran conflict. The semiconductor super cycle has undoubtedly provided strong support for valuations. (