Lowest Credit Loan Balance and Highest Forced Sale Volume 'Many Empty Accounts'... Forced Disposals Reach 40 Billion Won in February

[Asia Economy Reporter Lee Seon-ae] With the domestic stock market plummeting, the balance of credit transaction loans has hit a record low, while forced liquidation has reached a record high, raising warning signals about individual investors' 'empty accounts.' In February, the balance of credit transaction loans is expected to continue decreasing, and forced liquidation is likely to increase, which could act as additional downward pressure on the index. Experts are raising their voices, emphasizing the need to be cautious about stocks with a high proportion of credit transaction loan balances, as the volume of forced liquidation could further increase downward pressure on the index.

According to the Korea Financial Investment Association on the 3rd, the balance of credit transaction loans, where individual investors borrow money from securities firms to buy stocks, has been declining continuously. Compared to the beginning of the year, it has decreased by more than 1 trillion won. As of the 27th of last month, the balance of credit transaction loans on the two major stock exchanges was 22 trillion 48 billion won, down 518.9 billion won from the previous trading day. This is the lowest level in about 10 months since March 23 of last year (21 trillion 978.9 billion won).

The decrease in the balance of credit transaction loans has directly led to an increase in forced liquidation. Forced liquidation is a method where, if the value of stocks purchased on credit (credit transactions) falls below a certain level or if payment for unsettled transactions is not made, the securities firm forcibly disposes of the stocks at the lower limit price to recover the loan. When forced liquidation occurs, not only do individual investors face a surge in empty accounts, but it also increases downward pressure on the stock market.

From the 3rd to the 27th of last month, the average daily amount of forced liquidation compared to unsettled margin trading debts was 20.55 billion won. This is a 38.8% increase compared to the daily average in December (14.81 billion won). On the 26th of last month, the ratio of forced liquidation to unsettled debts soared to 11.7% (28.9 billion won), marking the highest level in eight months since May 25 of last year (12.0%). On the 11th of last month, forced liquidation worth 31.4 billion won occurred in a single day, the largest scale in the past three months.

The securities industry voices that forced liquidation could reach up to 40 billion won in February. This is further supported by forecasts that the lower band of the KOSPI could break below the 2,500 level again.

Lee Kyung-min, head of the investment strategy team at Daishin Securities, predicted, "As the index falls, forced liquidation will continue to increase." Given that negative factors surrounding the domestic stock market are unlikely to be resolved in the short term, there is growing concern about forced liquidation, which burdens market supply and demand and accelerates index decline. Attention should be paid to stocks with a high proportion of credit transaction loan balances. As of the end of last month, in the KOSPI market, high-ranking stocks in credit transaction loans included Highsteel, LS Networks, Sajo Dong-A One, Camu ENC, Sunny Electronics, and Ildong Pharmaceutical. In the KOSDAQ market, top stocks included GSE, Daishin Information & Communication, Hanil Forging, PH, Hucentec, and Humasis.

This content was produced with the assistance of AI translation services.