In March, when stock market volatility was extreme due to the war between the United States and Iran, the ratio of forced sell-offs to margin balances nearly doubled from the start of the year. Margin balances for brokerage transactions are "ultra-short-term debt investing" funds that must be repaid within three days, and as investors failed to meet collateral ratios amid plunging stock prices, securities firms carried out a wave of forced disposals (margin calls).
According to statistics from the Korea Financial Investment Association on the 3rd, the average daily ratio of forced sell-offs to margin balances from the 3rd to the 31st of last month was 2.11%.
This is nearly twice as high as the average daily ratio of forced sell-offs to margin balances in January–February this year, before the outbreak of the U.S.-Iran war. The average daily ratio in January–February this year was around 1.11%.
Brokerage margin balances are classified as ultra-short-term debt investing funds. A margin transaction is a transaction in which an investor borrows money from a securities firm to buy stocks and repays the money within two trading days (T+2), the domestic stock settlement date. If the investor fails to pay within two trading days, it becomes a forced sell-off.
On the 5th and 6th of last month, when clashes between the United States–Israel and Iran occurred and the domestic stock market repeatedly saw record-breaking plunges and surges, the ratio of forced sell-offs to margin balances spiked to 6.5% and 3.8%. However, since then it generally remained at a moderate level, though it has been rising again recently.
Lee Sang-heon, an analyst at iM Securities, said, "When price swings widen, especially during phases of steep declines, forced sell-offs increase."
Meanwhile, balances of credit transaction loans, another "debt investing" fund, are again on the rise. As of the 1st, credit transaction loan balances stood at 32.981 trillion won. Earlier, on the 5th of last month, the balance reached a record high of 33.6934 trillion won.