8 Listed Companies' Mysterious Lower Limits... Market Cap Drops 3.65 Trillion Won in One Day

The stock price of Seongwang, a comprehensive logistics company with a market capitalization exceeding 1 trillion won, plummeted sharply. The amount traded during the day was only 3.4 billion won, and the market capitalization shrank by more than 330 billion won. Not only Seongwang, but also eight other listed companies including Harim Holdings, Daesung Holdings, Sebang, Dow Data, Samchully, Seoul Gas, and Daol Investment & Securities saw their stock prices fall to the daily limit. Considering the sell orders that were not executed, further declines cannot be ruled out. The Yeouido securities market noted that Soci?t? G?n?rale (SG Securities), a foreign securities firm, was commonly the top seller among the listed companies that hit the lower price limit. These companies typically had low average daily trading volumes, but some sell orders came from certain contract for difference (CFD) accounts, which is analyzed to have caused an imbalance in supply and demand.

원본보기 아이콘

According to the Korea Exchange, on the 24th, Seoul Gas closed at 327,500 won, down 29.95% from the previous trading day. The stock price returned to the level of November last year. The market capitalization shrank from 2.34 trillion won to 1.64 trillion won in one day. About 24,000 shares were traded, and the sell orders piled up at the lower limit reached 126,000 shares.

Samchully’s market capitalization dropped from the 2 trillion won range to 1.4 trillion won. Harim Holdings decreased from 1.8 trillion won to 1.3 trillion won, and Dow Data’s market capitalization shrank from 1.7 trillion won to 1.2 trillion won. SG Securities ranked first and second among the top selling desks.

Among the companies that hit the lower price limit that day, Harim Holdings had the largest trading volume, with transactions worth 181 billion won. The trading volumes of the other companies ranged from as low as 3.4 billion won to as high as 36.4 billion won. Because these companies were not actively traded, the sudden surge in sell orders caused the stock prices to fall to the lower limit. The combined market capitalization of the eight listed companies, which was 12.1949 trillion won on the 21st, sharply dropped to 8.5407 trillion won on the 24th.

It is notable that on the 20th, Kim Ik-rae, chairman of Dow Kiwoom Group, sold 1.4 million shares of Dow Data through after-hours trading. The next day, the stock price fell by more than 6%. It closed at 43,550 won, close to the disposal price of 43,245 won. The trading volume that day was 1.21 million shares. Some investors who acquired Dow Data shares through after-hours trading appeared to have sold early on the 24th, contributing to the supply-demand imbalance.

Daol Investment & Securities, which has a relatively small market capitalization, experienced more active trading than usual. From the 11th to the 21st, daily trading volume did not exceed 800,000 shares, but nearly 5 million shares were traded on this day. Through SG Securities’ desk, 620,000 shares were sold. A Daol Investment & Securities official explained, "The stock price has more than doubled this year, increasing the credit balance volume. Since there are no special negative factors for the company, it is presumed that the sales were made for profit-taking."

Regarding the flood of sell orders through SG Securities and the immediate plunge to the lower price limit at the start of trading, there is speculation that there might have been a problem with CFD (contract for difference) accounts. CFD accounts allow leverage of up to 2.5 times depending on the stock. For blue-chip listed companies, this means that with just 100 million won, one can buy stocks worth 1 billion won. If the stock price falls by 10%, the principal can be completely wiped out. When the domestic stock market was shaken on the 20th and 21st, Harim Holdings, Sebang, and Dow Data also showed weak trends. For companies with a high proportion of purchases through CFD accounts, forced liquidation due to insufficient collateral was possible. However, since these companies had an upward trend in stock prices this year, the possibility of selling for profit-taking cannot be excluded.

Financial authorities are paying attention to the rapid increase in margin loan balances this year. According to the Korea Financial Investment Association, the margin loan balance, which was about 18.7691 trillion won on the 3rd, increased to about 20.2863 trillion won on the 20th. Some securities firms have suspended new margin loan services, citing exhaustion of margin loan limits.

If new margin loan services are suspended, the capacity for new purchases in the domestic stock market may temporarily decrease. As the market rebounded quickly in a short period, small issues could serve as excuses for profit-taking, increasing stock price volatility. If the stock value falls below the collateral maintenance ratio (140%), forced liquidation may occur. A financial investment industry official said, "Looking at the recent stock market atmosphere, new investors are cautious while existing investors are taking profits. Investors who borrowed money to invest will likely become more wary."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.