Forced selling hits 89.3 billion won on Wednesday
Forced-selling ratio rises to 7.2% of outstanding margin debt
A relentless slide in domestic stocks is driving a surge in forced liquidations among retail investors who borrowed to buy shares.
According to the Korea Financial Investment Association, forced selling against outstanding margin debt in brokerage accounts reached 89.3 billion won ($66.7 million) on Wednesday — the largest since 122 billion won recorded on July 31, roughly two and a half months ago.
The ratio of forced selling to outstanding margin debt climbed to 7.2 percent, surpassing the 7.1 percent seen on July 31. The ratio had hovered around 2 percent at the start of this month before jumping to 5.6 percent on Tuesday and continuing to rise.
Forced selling is triggered when an investor fails to repay a brokerage by a set deadline, allowing the firm to sell the investor's shares without consent to recover the funds. In margin trading, forced selling proceeds when an investor cannot cover the outstanding balance by the settlement date.
The rapid increase in forced selling reflects the sharp recent decline in domestic equities. The Kospi has fallen more than 13 percent since the start of this month through Wednesday.
The balance of credit loans — a key gauge of leveraged investing — stood at 33.71 trillion won.
The Kospi closed Wednesday down 454.59 points, or 7.57 percent, at 5,554.22, extending its losing streak to seven consecutive sessions since Oct. 6 and shedding 21 percent over that period.
The seven-session losing streak is the first of its kind since Sept. 3, 2024, roughly two years and one month ago.
Concerns about the profitability of the AI industry have weighed on investor sentiment. Market research firm Gartner projected that $6 trillion would be invested in AI infrastructure between 2027 and 2030, while actual data center-related sales could reach only up to $3.6 trillion.
Gartner also estimated that $8.5 trillion in sales would be needed by 2030 to recoup the massive capital and financing costs and achieve target returns on invested capital.
Seo Sang-young, a managing director at Mirae Asset Securities, said the figures "have deepened concerns that even rapid growth in AI demand may not translate into sufficient returns on large-scale capital investment."
moon@heraldcorp.com
