South Korean retail investors have dramatically reduced their leveraged positions to the lowest level in three months, with margin loan balances dropping to 33.4 trillion won ($22.6 billion) as of July 16. According to the Korea Financial Investment Association, this represents a 13% decline from the 38.6 trillion won peak at the end of June, marking the lowest level since April 15. The deleveraging trend follows the massive losses reported earlier, with retail investors losing approximately 2.15 trillion won (₹1.45 billion) from leveraged trading over the past month as sharp market swings triggered widespread margin calls. More than 1.2 million retail leverage accounts had reached margin-call thresholds by July 13, with estimates placing the number of accounts fully liquidated between 320,000 and 460,000.
Investors in their 20s and 30s reportedly accounted for 62% of accounts hit by full forced liquidations, with many retail traders having built leveraged positions during South Korea's strong equity rally. The Korea Financial Investment Association has recorded a sharp increase in forced stock sales linked to unpaid brokerage balances, with actual forced sales from unsettled trades reaching 451.9 billion won between July 1 and July 13. However, the broader estimates remain unverified pending an association release or brokerage-level data. The current data shows that retail investors are tapering down their bets significantly, with investor deposits declining to 108.1 trillion won on July 16, down from the June 4 peak of 139.7 trillion won, according to the Korean Financial Investment Association.
The unwinding of leveraged positions has resulted in a dramatic market correction, with the KOSPI declining 30% from its June 19 peak within just 20 trading sessions. Major Korean companies have suffered significant losses, with Samsung Electronics shedding a quarter of its market capitalization and SK Hynix losing a third of its value. Both companies had earlier crossed the $1 trillion market capitalization milestone during the record-breaking KOSPI run. JPMorgan Chase & Co. strategists noted that "an intense period of de-leveraging has driven equity prices lower," adding that "some of the side effects of this growth have been the elevated volatility and forced foreign selling — producing a self-correcting mechanism."
The losses followed months of heavy borrowing by retail investors, with Reuters reporting in June that borrowed investment in South Korean equities had reached a record 60 trillion won by the end of May. According to CNBC, citing KB Financial Group data, South Korean retail investors have bought a net 14 trillion won ($9.4 billion) of single-stock leveraged ETFs since the products were introduced on May 27, while foreign investors purchased about 2 trillion won over the same period. The KODEX SK Hynix Single Stock Leverage ETF, which aims to deliver twice the daily movement in SK Hynix shares, has fallen about 70% from its June peak and about 50% since its debut. Regulators have responded with tighter restrictions, raising the minimum cash requirement for investors trading single-stock leveraged ETFs to 30 million won from an effective minimum of 3 million won, and banning new listings of leveraged ETFs linked to individual stocks.
The leverage rout follows a major change in how South Korean retail investors allocated their money, with crypto holdings on the country's major exchanges falling from $83.3 billion in January 2025 to $41.4 billion by February 2026 as investors increasingly moved toward equities. Crypto trading activity also weakened as the stock market gained momentum, with won-based crypto trading volume falling 71% between August 2025 and May 2026, while KOSPI trading volume rose 243% during the same period. The shift from crypto to equities has been a significant trend in South Korean retail investment behavior, though the current data suggests retail investors are now reducing their overall market exposure across both asset classes.
