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.