暴涨20%又跌5%，韩股下跌何时触底？

Original｜Odaily Planet Daily (@OdailyChina)

Author｜Wenser (@wenser 2010 )After a violent rebound of about 20% last Friday, South Korea's KOSPI index closed down 5% today, temporarily standing at 6,257 points.

Meanwhile, various changes facing the Korean stock market have gradually surfaced: on one hand, liquidated accounts have set a record of 500,000; on the other hand, over 24 trillion won has flowed back from the stock market to banks as a risk-averse move. With South Korean President Lee Jae-myung's approval rating hitting a new low and the country's financial regulators frequently intervening, the next direction of the Korean stock market has become a focal point for domestic investors and global capital markets alike. After all, South Korea is home to two semiconductor giants riding the AI wave.

Is the market bleeding out and continuing its decline, or will regulatory intervention provide a boost? At least for now, the downturn in Korean stocks is far from over.

The Dire State of Korean Stocks: Over 500,000 Leveraged Retail Investors Liquidated, Investment Deposits Shrink by Over 35 Trillion Won

In our previous article "South Korean Stocks Triggered 7 Circuit Breakers This Year: A Summer Ruined by Leverage for Young Investors", we used the real stories of several Korean investors to uncover the bloody market crash that unfolded this summer.

After nearly half a month of continuous declines and occasional rebounds, various data indicate that the Korean stock market is still bleeding: on one hand, retail investors are being "wiped out" due to insufficient capital; on the other hand, investment deposit funds are shrinking while bank savings are expanding.

Goldman Sachs Data: Over 500,000 Korean Leveraged Retail Accounts May Be Fully Liquidated

On July 30, well-known financial account The Kobeissi Letter on X platform posted that according to Goldman Sachs data, as of July 13, more than 1.2 million leveraged retail trading accounts in South Korea had triggered margin calls, with an estimated 320,000 to 360,000 accounts fully liquidated, accounting for approximately 3.4% of South Korea's adult population (Odaily Planet Daily note: equivalent to roughly 1 in 30 Korean adults being at risk of liquidation). With the KOSPI index down about 18% cumulatively since July 13, the number of fully force-liquidated accounts is now estimated to have exceeded 500,000.

Despite the violent rebound in the KOSPI index and stocks like Samsung and SK Hynix on July 31, countless liquidated accounts have already become permanent dust in Korean stock market history.

"Capital Flows Back to Banks": Over 24 Trillion Won Pours into Five Major Banks' Term Deposits

Due to adjustments in the semiconductor sector and stricter regulations on leveraged investments, pending investment funds in the Korean stock market have rapidly withdrawn, leading to a phenomenon of "reverse capital migration."

Data shows that as of the end of July, the term deposit balance of South Korea's five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) reached 973.49 trillion won, up 24.09 trillion won from the end of the previous month, marking the largest single-month increase this year.

Capital surrounding the stock market has also contracted significantly. According to the Korea Financial Investment Association, investor deposits in securities accounts (pending funds for stock trading) peaked at 139.69 trillion won on June 4, but had fallen to 107.20 trillion won as of July 28, a decrease of over 32 trillion won in less than two months. The credit transaction financing balance, representing the scale of margin trading, fell to 33.19 trillion won during the same period, down about 4.5 trillion won from the peak of 37.72 trillion won recorded on July 2, a decline of approximately 12%.

Market Turmoil Frightens Investors: Investor Deposits Plunge by Over 35 Trillion Won in 2 Months

Affected by the sharp fluctuations in the KOSPI index, average daily investor deposits (Odaily Planet Daily note: investor deposits refer to funds deposited by investors into securities company accounts for purchasing stocks; this is a daily average statistic) in July plunged by nearly 20 trillion won compared to the previous month. This level is about 10 trillion won lower than in March of this year (Odaily note: at that time, the KOSPI index experienced a sharp correction due to the US-Iran conflict).

According to data published by the Korea Financial Investment Association on August 3, as of the 30th of last month—the day the KOSPI index hit a阶段性 low—investor deposits stood at 104.6584 trillion won. Compared to the all-time high of 139.6948 trillion won recorded on June 4, this represents a decrease of over 35 trillion won in just about two months.

Combined with previously mentioned news—such as 85% of household loan quotas already used in the first half of the year and the Bank of Korea's rate hikes—the Korean stock market is expected to face another wave of liquidity tightening in the short term.

Korean Regulators Step In: Margin Requirements for Single-Stock Leveraged ETFs Triple, "Emergency Intervention Powers" Planned

The "bloody July" in Korean stocks has forced financial regulators to seek various measures to mitigate extreme market volatility and leverage pressure. Specifically, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) are working together to influence the market through legislative changes and stricter margin requirements for leveraged trading.

FSC May Be Granted "Emergency Intervention Powers": Limiting Leverage Multiples and Setting Investment Caps

The Financial Services Commission (FSC) has initiated amendments to the Capital Markets Act alongside the Financial Supervisory Service (FSS), focusing on single-stock leveraged ETF products that are believed to have amplified volatility during the recent market crash. Planned measures include adjusting leverage multiples, setting investment caps, and invoking "emergency intervention powers."

Currently, some single-stock leveraged ETFs in the Korean market use up to 2x leverage. Regulators are discussing whether to allow temporary reductions in leverage multiples during abnormal market fluctuations to reduce risks from concentrated capital trading. (This approach draws on recent regulatory measures in Hong Kong, where the Securities and Futures Commission has allowed institutions meeting asset management capabilities, risk control standards, and information disclosure requirements to adjust leverage multiples for listed leveraged and inverse products, providing room for dynamic market supervision.)

Korean regulators believe that under the current system, matters involving changes to revenue structures may require approval from fund holder meetings, making it difficult to respond quickly under extreme market conditions. Therefore, they plan to establish an emergency regulatory mechanism that can be activated without complex procedures.

Additionally, Korean financial regulators are considering: setting individual investment limits for single-stock leveraged ETFs, uniformly capping investment limits at around 20% to prevent excessive capital concentration, and introducing a simulated real-trading system to improve investor understanding of risks associated with leveraged products.

Korean regulators stated that the increase in basic margin requirements mainly raises the investment threshold, while investment limits act as a "cap" on capital inflows—together forming a complementary risk control system.

Previously, South Korea had already... Data shows that on the first day of the new rules, the trading volume of 16 related leveraged ETFs was approximately 3 trillion won, only about one-quarter of the 12.4 trillion won recorded the previous trading day, and down about 80% from the 15 trillion won level on July 29.

First Day of Tighter Leveraged ETF Trading in South Korea: Trading Volume Plunges 75%

According to Korean media reports, on the first day of the financial regulators' restrictions on single-stock leveraged ETFs (raising the minimum margin requirement for investors from 10 million won to 30 million won effective July 31), the total trading volume of 16 single-stock leveraged and inverse ETFs stood at 3.3071 trillion won. This figure represents a sharp decline of 75.3% compared to the 12.4485 trillion won recorded on July 30. Compared to the average daily trading volume of 12.27 trillion won in July, the financial regulators' strong control measures have clearly had an immediate effect in curbing capital flows.

Excluding inverse products, the trading volume of 14 major single-stock leveraged ETFs also fell by 64.4%, from 6.9354 trillion won on July 30 to 2.4686 trillion won.

It is worth noting that the Korean market widely regards single-stock leveraged ETFs as the "culprits" behind this crash. Many believe that these leveraged ETF funds (such as those tied to SK Hynix) intensified market volatility and led to billions of dollars in investor losses.

Kim Yong-beom, policy chief at the South Korean presidential office, has been indicted by Lee Jong-bae, a conservative former Seoul city councilor backed by the opposition People Power Party, on charges of abuse of authority, coercion, and obstruction of business, over his alleged involvement in pushing for the listing of leveraged ETFs linked to individual semiconductor stocks. This is the same official who previously declared he would "block the listing of single-stock leveraged ETFs, even if it means stepping over my dead body," and who earlier sparked a "Korean-style common prosperity rumor" by suggesting "distributing AI profit dividends to all Korean citizens," which only subsided after President Lee Jae-myung clarified the matter. See "South Korea's Financial Turmoil: Samsung Strike, AI Communism, and a Crypto Bloodbath"

Stock Market Woes Affect Presidential Standing: Lee Jae-myung's Approval Rating Hits Lowest Point of His Term

Affected by the market turmoil described above, South Korean President Lee Jae-myung—who has historically encouraged citizens to "stay away from real estate speculation and invest in stocks"—has also suffered negative consequences.

A poll released today shows that amid controversies including the stock market crash, President Lee Jae-myung's approval rating has fallen to its lowest level since taking office in June last year. The poll, conducted by Realmeter and commissioned by media outlet EKN, shows that positive assessments of Lee fell 0.4 percentage points from the previous week to 45.9%, marking the third consecutive weekly decline; negative assessments rose 1 percentage point to 50.5%, surpassing the key 50% threshold for the first time.

Another poll by the same polling agency showed the ruling Democratic Party's approval rating at 45.1%, up 3.8 percentage points from the previous week, while the main opposition People Power Party's rating fell 2.9 percentage points to 37.7%.

All one can say is that when the market rises, the president who encourages stock investing is hailed like the God of Wealth; when the market falls, the president becomes the biggest scapegoat.

Outlook for Korean Stocks: After Foreign Buying Spree, Morgan Stanley Raises Rating to Overweight

After a prolonged slump throughout July, the KOSPI index surged more than 17% intraday on July 31, marking its largest single-day gain on record. While some investors optimistically view this rebound as a "signal flare" for a trend reversal, market experts believe that the vulnerability of the Korean stock market—highly susceptible to foreign capital flows and prone to sharp swings—has once again been validated, and this rebound may ultimately turn out to be nothing more than a "dead cat bounce."

Data shows that within just over two minutes of market opening that day, net foreign purchases of Korean stocks reached 1.6 trillion won; by the close, foreign investors had accumulated net purchases of 7.18 trillion won, setting an all-time record. Meanwhile, domestic retail investors recorded net sales of 8.2 trillion won, also setting a record for the highest single-day net selling.

In other words, last Friday marked a moment where Korean retail investors and foreign investors each thought the other was "out of their minds."

Morgan Stanley Upgrades Korean Stocks to Overweight, Sees Potential 36% Upside

Today, Morgan Stanley upgraded its rating on Korean stocks from Equal-weight to Overweight, stating that the recent "leverage clearing" provides a better entry opportunity for investors looking to participate in AI trade and the industrial supercycle theme.

Strategists including Daniel K. Blake believe that with the significant unwinding of crowded trades and leveraged positions, the KOSPI index still has 36% upside to its target of 9,000 points.

On details, analysts believe the recent sell-off was "mainly driven by technical factors" and noted that "the deleveraging process for leveraged ETFs, hedge fund leverage, and retail margin trading is more than half complete." Morgan Stanley expects the KOSPI index to fluctuate in the 5,500 to 10,500 point range in the short term, and believes Samsung Electronics and SK Hynix will provide valuation support to the market; stocks in industries, defense, and financials are expected to benefit from favorable factors.