[Edaily Reporter Choi Jeong-hee ] Retail investors who borrowed money to invest in stocks remain mired in debt even after being forced into liquidation (compulsory sale by brokerage firms) due to the stock market crash. The total amount of debt has increased more than fivefold in the past year.

On the 14th, the office of People Power Party lawmaker Park Dae-chul of the National Assembly’s Political Affairs Committee reviewed data from the Financial Supervisory Service and found that the outstanding principal owed by individual investors immediately following forced liquidations at the top 10 domestic securities firms by equity capital totaled 37.79575 billion won from January through July of this year.

During the same period last year, the outstanding principal was 7.45588 billion won, marking an approximately 5.1-fold increase in just one year.

Outstanding principal occurs when an investor borrows money from a securities firm to purchase stocks and, following a sharp drop in stock prices, is forced into a forced liquidation; the sale of the held stocks is insufficient to fully repay the loan principal. This happens when the total debt is too large to be fully recovered, even after the securities firm recovers part of the principal through the forced liquidation.

This year, the outstanding principal has surged since June. In January, the outstanding principal stood at 5.5132 billion won, but it decreased to 2.48552 billion won by May. This was because stock prices had been on an upward trend up until that point. However, as stock market volatility increased after June, outstanding principal surged to 13.11467 billion won; although it declined somewhat in July, it still reached 8.8164 billion won.

The KOSPI index started the year around the 4,000 mark and appeared to be climbing toward the 9,400 level in June, but it fell back to the 5,200 level in July, leading to increased market volatility.

Since the outstanding principal reported in this tally represents the balance of debt incurred immediately after forced liquidation, the amount could decrease if investors made additional cash deposits or repaid their debts to securities firms.

The actual scale of margin trading has increased. According to the Korea Financial Investment Association, the outstanding balance of margin loans reached a record high of 38.6328 trillion won as of June 24. Although the balance fell to around 27 trillion won in early August, it rose to approximately 32 trillion won on the 10th of this month.

The balance of unpaid balances, which could lead to forced liquidation, is also on the rise. The unpaid balance across 10 securities firms exceeded 1.1954 trillion won for the first time in May of this year. As of the end of July, it had risen to 1.351 trillion won.