South Korean stocks opened strong and then gave up those gains on July 22. The article says the pattern reflected heavy profit-taking, risk controls and position cuts during the rebound rather than a clean reset in market leverage.
Margin financing eased earlier, then signs of strain returned
The data cited in the piece show that visible credit financing had been reduced by 13.1% on a cumulative basis. But the July 21 reading showed a rebound. The sharpest deterioration came from custody cash, which fell by KRW 5.83 trillion in a single day, while the R2 ratio rose again to 31.45%.
According to the article, debt edged up while cash dropped sharply, leaving the remaining financing position heavier relative to available account cash. In other words, the deleveraging process did not move in a straight line.
Forced liquidation pressure stayed above KRW 50 billion for two days
On July 21, forced liquidations tied to unsettled trades reached KRW 59.6 billion, above the KRW 52.8 billion recorded on July 20. That marked a second straight trading day above KRW 50 billion and the highest level since KRW 81.6 billion on July 10.
The article highlights an even more important signal: the share of forced liquidation amounts relative to unsettled balances kept rising.
- July 16: 1.1%
- July 20: 4.6%
- July 21: 5.7%
The piece says this does not yet amount to a full-scale cascade of margin blowups. Still, the move from 1.1% to 5.7% shows that passive disposal pressure in ultra-short-term credit trading is building quickly. Forced selling remains active, but the market has not reached a one-off end-stage washout.
Retail investors kept cutting long leveraged ETF exposure
The article says South Korean retail investors continued to capitulate on July 22. Their trades included:
- Net selling of about KRW 33.4 billion in SK hynix long leveraged ETFs;
- Net selling of about KRW 58.7 billion in Samsung Electronics long leveraged ETFs;
- Combined net selling of about KRW 92.1 billion in those two products;
- Net buying of about KRW 35.7 billion in a 2x inverse SK hynix ETF.
It also notes that Samsung Electronics and SK hynix long leveraged ETFs had both seen net selling by individual investors for two straight trading days. The interpretation in the article is that long leverage is cooling in a meaningful way, though this is not yet a full liquidation of product leverage. Instead, it points to a shift away from one-way bullish positioning and toward high-frequency two-way trading.
Foreign buying was strong but heavily concentrated
While retail investors were cutting risk, foreign investors kept buying. On July 22, foreign investors were net buyers of KRW 2.6311 trillion on the KOSPI. Within that total:
- SK hynix accounted for about KRW 1.2563 trillion in net buying;
- Samsung Electronics accounted for about KRW 583.4 billion in net buying;
- The two names together drew about KRW 1.8397 trillion.
That combined figure represented about 69.9% of all foreign net buying on the KOSPI. The article says this means foreign capital was not buying the whole Korean market indiscriminately. It was selectively absorbing selling pressure in the two semiconductor heavyweights.
In the broader market structure described by the piece, foreign investors were selectively buying semiconductor leaders, domestic institutions were still lowering risk, and retail investors were pulling part of their money out of KOSPI spot holdings and long leveraged ETFs. The article argues that some risk is therefore being transferred from households to global institutions, a structure it describes as healthier than one in which foreign and institutional investors sell together while retail investors buy alone.
Conclusion in the article: volatile phase-four deleveraging, not final clearance
Based on those data points, the author concludes that Korean equities are in the latter half of phase four of deleveraging, a stretch defined by repeated volatility, rather than in a final clearance stage.
At the macro level, the article also says broader weakness across Asian equities was linked in part to external pressure, including higher oil prices and risk-off positioning ahead of Google earnings.
The article was written by qinbafrank. It states that the views are those of a PANews contributing columnist, do not represent PANews, and do not constitute investment advice.