South Korean Stock Market
The 'Margin Call'—A Financial Grim Reaper!!!
#MTF
Nearly 1.2 Million Margin Calls in a Single Week!
An incident in South Korea this week serves as a stark warning about the dangers of "investing with borrowed money" in the stock market.
Margin calls were issued to approximately 1.2 million investment accounts in just one week. This affected about 3.4% of the country's adult population. Furthermore, over 300,000 accounts were subjected to forced liquidation.
What happened?
Over the past few months, AI and semiconductor stocks had surged rapidly. Investors placed particularly high confidence in stocks like Samsung Electronics and SK Hynix.
However, many took on excessive risk by using borrowed funds—through margin trading and leveraged ETFs—rather than relying solely on their own capital.
A single day was enough...
This week, the KOSPI index plummeted by 8.95% in a single day. This marked one of the steepest declines since the 2008 financial crisis.
On that same day:
* Samsung Electronics – fell by approximately 10.7%
* SK Hynix – fell by approximately 15.4%
What is a Margin Call?
If you have purchased stocks using borrowed money, once the stock value drops below a certain level, the broker will notify you:
"Pay additional funds; otherwise, we will sell your shares ourselves."
This is a margin call.
Since many investors were unable to provide the additional funds, their shares were automatically sold off by the brokers.
Domino Effect
* The market fell.
* Margin calls were triggered.
* Brokers forcibly sold shares.
* Further selling pressure mounted.
* The market fell even further.
This cycle wiped out the capital of thousands of investors. Government Action
Following the worsening situation, the South Korean government has announced the following measures:
* A temporary ban on new single-stock leveraged ETFs,
* An increase in the minimum deposit requirement for investors,
* Mandatory training on risk awareness, and
* Stricter regulations.
A Lesson for Investors
Leverage can multiply profits manifold, but it can also magnify losses at the same rapid pace.
Investing using borrowed money is not a tool for wealth creation; if misused, it becomes a weapon that destroys wealth.
Three things are sufficient for long-term success in the stock market:
* Select good companies.
* Invest patiently.
* Avoid unnecessary leverage.
It is those who survive in the market who become wealthy in the long run.
This is a great lesson.
Invest the market wisely and with due diligence always to safeguard our capital and earn steady income!
