Margin call issues that either enables brokerages or forces individuals to sell stock due to fall in equity value in the debt-financed stock purchase has affected Korean shares worth 2.3 trillion won ($2.1 billion) last year, up 74 percent from 2017, as the result of poor stock performance.
Margin calls were triggered on Kospi shares worth 1.15 trillion won and Kosdaq shares valued at 1.13 trillion won. The combined amount of 2.28 trillion won was the largest since 2011.
If one buys stock on margin – the process of borrowing money from a brokerage firm for purchase – the stock becomes subject to liquidation if the equity falls below the minimum maintenance requirement.
Stocks in mass fell below the maintenance margin during October crash when the main Kospi lost 13.4 percent and the secondary Kosdaq 21.1 percent. As much as 262.7 billion won worth Kospi shares and 258.9 billion won worth Kosdaq shares were subject to liquidation, a monthly record since such data has become available from March 2006.
Margin call cases eased in November with the amount falling to 126.4 billion won, but remain relatively higher than other exchanges as the Korean market underperform others, stock exchange official said.
By Moon Il-ho and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]