The "Minsky Moment" for South Korean Stocks
Complete. Here is the key summaryHSBC analysis points out that South Korean stocks face the risk of a "Minsky Moment," with high leverage potentially triggering a liquidity crisis. Although retail margin balances fell 15% from their peak in July to 32 trillion won, and the scale of single-stock leveraged ETFs dropped to around $10 billion, investors have not withdrawn en masse, with forced liquidations accounting for only 2%, leaving absolute leverage levels still high
HSBC analyzes the risk of a "Minsky Moment" currently facing the South Korean stock market, where, against a backdrop of high leverage, the market could experience a sudden decline, triggering a liquidity crisis.
Although retail margin balances have retreated from their peaks, absolute levels remain high. Furthermore, while the scale of single-stock leveraged ETFs has decreased due to shrinking market capitalization, investors have not withdrawn on a large scale.
In July, retail margin balances in the South Korean stock market fell by approximately 15% from their June peak, but still remained as high as about 32 trillion won ($22 billion). In July, only 2% of outstanding margin accounts were subject to forced liquidation. The total size of single-stock leveraged ETFs dropped to around $10 billion, approximately one-third of their peak level, driven primarily by capital losses rather than investor exit.
