Market Volatility Hits 4th Straight Day: Warning Lights Flash Over 'Forced Liquidations'

[Anchor]

The KOSPI has plummeted by more than 4%, triggering a sidecar—a temporary suspension of program trading—for the fourth consecutive trading day. As the market continues to swing wildly, there is a growing number of cases involving "debt-financed" investments and forced liquidations of stocks.

Reporter Kim Hye-min has the story.

[Reporter]

The KOSPI started the day on a weak note and saw its losses widen rapidly in the afternoon.

At one point, the index plunged by 6.8% to 7,541, triggering a sell-side sidecar that halted program trading orders for five minutes.

This marks the 24th time this year, a frequency comparable to the 2008 global financial crisis.

The KOSPI closed at 7,730, down 4.5%.

Market analysts pointed to various factors, including renewed tensions in the Middle East following the downing of a U.S. helicopter and concerns that U.S. consumer prices might come in higher than expected.

Amid the volatile investor sentiment, large-scale ETF trading is currently dictating the direction and intensity of the market.

[Interview: Lee Kyung-min / Researcher at Daishin Securities: On June 8, financial investors sold 2.5 trillion won, yesterday they bought 2.1 trillion won, and today they sold 1.8 trillion won... Since most of this is ETF trading, it tends to be directional, so once a direction is set, it moves that way.]

Despite the repeated spikes and drops, many individual investors are still engaging in high-risk investments.

Forced liquidations—where brokerage firms automatically sell off an investor's stocks because the collateral has become insufficient due to falling prices—have exceeded 470 billion won over the past three trading days.

The balance of personal line-of-credit accounts at the five major commercial banks stands at 42.9 trillion won, the highest level in three years and seven months since late November 2022.

The balance increased by 608.5 billion won on June 5 and June 8, when the market saw significant drops.

[Interview: Seo Ji-yong / Professor of Business Administration at Sangmyung University: In a bear market, fear intensifies, making it easy to repeatedly cut losses or liquidate at the bottom. Investors tend to fall into a pattern of buying with leverage at the peak and selling at the bottom...]

Experts advise that with unprecedented volatility continuing, it is a time to be more cautious than ever when it comes to trading.

(Reported by Choi Ho-jun and Kim Heung-gi | Video edited by Choi Jin-hwa | Graphics by Park Tae-young and Lee Jun-ho)
※ Please note: This article was translated by AI and may contain errors.