Korean margin debt hits record KRW 36.5T; short balances up 67% YTD as KOSPI 70% rally fuels leverage surge

Leverage built alongside a 70% KOSPI rally

Korean equity margin lending reached a record KRW 36.47 trillion (approximately $25.7 billion) as of May 15, up KRW 9.18 trillion (+33.66%) from the year-end 2025 baseline of KRW 27.29 trillion. The surge reflects retail investor borrowing that has tracked closely with the KOSPI's approximately 70% year-to-date gain.

Short-selling balances have expanded in parallel. As of May 12, short balances stood at KRW 20.58 trillion, up 67.18% year-to-date and approaching the all-time peak of KRW 21.17 trillion recorded on May 11. Both the long-leveraged and short-leveraged sides of the market have grown simultaneously, compressing the margin for error when external shocks arrive.

Securities firms warn of cascading forced-liquidation risk

Major Korean brokerage firms have issued explicit warnings about systemic risk. When margin-financed positions breach collateral ratio thresholds, they trigger automatic forced-liquidation sales, which depress prices and risk setting off additional margin calls across connected positions. Intraday market capitalization turnover reached 0.85% in May, up from 0.59% in April, indicating a shift toward short-horizon speculative trading consistent with margin-amplified momentum strategies.

What to watch

The risk crystallizes when an external shock triggers simultaneous collateral breaches across margin accounts. The May 15 global bond rout — S&P 500 -1.24%, 10-year Treasury yield +116 basis points — is the type of event that could push Korean markets toward that threshold. Near-term indicators include the Korea Exchange (KRX) weekly margin balance report (every Thursday) and the Bank of Korea (BoK) rate decision scheduled for May 29.

Not investment advice. Verify all figures with primary sources before acting.