As stock market volatility has increased since last month due to Middle East geopolitical risks, even securities firms have emerged over the weekend recommending clients make additional margin deposits. That is because risks that pile up over the weekend are reflected all at once right after the Monday open, cementing a pattern of repeated spikes and plunges.
In response, a movement is spreading among investors to increase idle cash every Friday to preemptively counter weekend risk.
According to the financial investment industry on Apr. 6, Korea Investment & Securities Co. on the 3rd notified overseas futures and options investors to beware of sharp market swings that may occur over the weekend and to make additional margin deposits.
Korea Investment & Securities Co. said, "If you hold positions over the weekend, sharp market swings may create a large gap between Monday's opening price and Friday's closing price," and noted, "This could trigger forced liquidation, so please make additional margin deposits in advance to prevent forced liquidation and the occurrence of debit balances."
In fact, since the Middle East war, the market has repeatedly plunged on the next trading day after weekends. Starting with the KOSPI index's 7% crash on the 3rd, the first trading day after the Samil Independence Movement Day substitute holiday last month, it finished lower on three of the four Mondays in March (the 9th -6.0%, the 23rd -6.5%, the 30th -3.0%). Of the five KOSPI sell-sidecar triggers since the war, three were concentrated on the trading day right after the weekend.
President Trump escalated geopolitical tensions by demanding Iran's unconditional surrender every weekend, pressuring the opening of the Strait of Hormuz, and unleashing hard-line remarks including threats to destroy power plants. On top of that, tangible military clashes such as Israel's attack on an Iranian steel mill further stoked market anxiety.
Accordingly, investors' cash management strategies are changing. Since late March, a clear trend has emerged of increasing standby funds in the market every Friday. In fact, margin deposits, which had fallen every Friday for five straight weeks starting the second week of February, turned to an uptrend from the third week of March. On the 20th and 27th last month, deposits increased by 5 trillion won and 1.3 trillion won, respectively, indicating a move to raise cash holdings instead of taking aggressive positions to brace for weekend uncertainty.
Buying also weakened. Except for the first week of last month, the net buying amount fell every Friday compared with the previous day. The declines widened to 420 billion won on the 13th, 800 billion won on the 20th, and 1.11 trillion won on the 27th.
On the 2nd, despite U.S. President Trump's remark that he would "turn Iran back to the Stone Age," individual investors made net purchases of 1.8 trillion won in the domestic stock market, but on Friday the 3rd they switched to net selling (1.7 trillion won).
A securities industry official said, "Since the Middle East war, U.S. stocks have also shown weakness in the latter half of the week," and noted, "It appears caution has grown over potential bad news that could emerge over the weekend."