Korea Margin Wipeout: 360,000 Accounts Force-Liquidated, Per Citi
Citi says more than 360,000 Korean margin accounts were force-liquidated as the KOSPI unwound, with 62% of wipeouts reportedly under age 35. Samsung and SK Hynix sit at the center of the leverage story.
Citi estimates that more than 360,000 South Korean margin accounts were forcibly liquidated during the KOSPI’s leverage-driven unwind, and 62% of those wiped out were reportedly under the age of 35. It is one of the cleanest examples of retail leverage meeting a real drawdown in years.
What actually happened
The KOSPI ripped higher earlier this year on an AI-driven bid led by Samsung Electronics and SK Hynix, then reversed hard. The KOSPI fell nearly 40% from its June peak near 9,100, closing at 5,663 on July 29 after back-to-back double-digit drops that triggered circuit breakers.
The selloff erased over $2 trillion in market value, fueled by retail investors’ heavy margin borrowing and leveraged ETFs during the earlier AI-driven rally led by SK Hynix and Samsung.
How big is the leverage problem
South Korea’s margin loan balance reached a record 38.63 trillion won on June 24 before declining to 34.37 trillion won by July 15. That decline was not voluntary deleveraging, it was forced.
The forced liquidation rate, which had averaged 2.1 percent across the preceding six months, surged above 10 percent. More than $284 million in investor capital disappeared in the first ten days of July alone, according to Reuters, which documented the crisis through interviews with affected traders.
Some accounts even ended up owing money to their brokers.
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Why it spiraled
Single-stock leveraged ETFs, hastily approved by South Korean regulators to retain domestic capital, triggered a death spiral through mechanical forced selling when the market turned. The feedback loop is the story here: falling prices trigger ETF rebalancing, which triggers margin calls, which triggers more selling.
Foreign and institutional investors had already retreated, leaving retail traders as the bagholders.
The regulatory response
South Korea’s Financial Services Commission rushed out emergency measures, banning new single-stock leveraged product listings and raising margin requirements.
Finance Minister Koo Yun-cheol called an emergency meeting, announcing tighter rules on leveraged products, round-the-clock monitoring, and debt counseling hotlines to support those hit hardest, especially under-35s sharing stories of wiped savings on social media.
Options market and stocks to watch
Watch EWY, the iShares MSCI South Korea ETF, for the cleanest US-listed read on Korean equity risk and any dead-cat bounce or continuation.
Watch semiconductor exposure through SMH, given how central Samsung and SK Hynix are to the global memory and AI chain. Contagion into NVDA and MU is worth monitoring, since HBM supply narratives run through Korean fabs.
Also watch TSM for spillover — the Korean deleveraging has already coincided with sharp moves across Asian chip names.
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