South Korea's Forced Liquidation Reaches Nearly 98 Billion Won in First Three Days of This Week
The Korea Financial Investment Association announced that from July 27 to 29, forced liquidations due to insufficient margin totaled 97.984 billion won, approximately 68 million USD.
On July 29, the forced liquidation ratio reached as high as 5%, reflecting the ongoing clearing of leveraged accounts amid recent stock market crashes.
This event has driven South Korean retail investors to the final stage of deleveraging, with funds flowing from margin debt to market selling pressure, reducing brokerage risk exposure and putting pressure on high-leverage investors.
Source: Public Information
ABAB AI Insight
Against the backdrop of a significant correction in KOSPI, the balance of margin trading has fallen from its peak, and while the scale of forced liquidations has contracted from the early-month peak, the daily ratio remains high, indicating that remaining leveraged positions are still being passively cleared.
In terms of capital flow, brokerages are protecting themselves through forced selling, motivated by the need to control credit risk, with resources quickly transitioning from retail leveraged positions to market liquidity, accelerating index bottoming and sentiment clearing.
Similar to the peak liquidation paths following the bursting of leverage bubbles in other markets, we are currently in the stage where forced liquidation is transitioning from outbreak to conclusion.
This essentially represents capital concentration: remaining leveraged positions are being concentrated and liquidated, as the margin mechanism self-reinforces during declines, thereby completing the final release of retail risk.
ABAB News · Cognitive Law
The forced liquidation ratio is a barometer of the progress of leveraged liquidations.
A single-day 5% is already a high-intensity clearing.
Only after the peak of liquidations can we see the true bottom signal.