Red Leverage — South Korea Retail Investors' "Liquidation Nightmare"

March 4, 2026, is a day etched in the memories of countless South Korean retail investors as the "Liquidation Day." When the KOSPI index plummeted 12% and triggered multiple circuit breakers in a row, what sounded behind the market were not gunfire but alarms of forced liquidations of margin positions.

On a micro level, this crash was a brutal "leverage kill scheme." South Korea's stock market has a unique ecosystem: retail investors contribute about 78% of the margin positions, with many only using 30%-40% of their margin to leverage several times their position size, heavily betting on AI leaders like Samsung Electronics and SK Hynix. The past year's bull market convinced them that "every pullback is a buying opportunity," and the margin balance once soared to a record high of 65 trillion won.
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However, the escalation of Middle East tensions severed the logical chain of energy supply. Rising oil prices triggered inflation expectations and concerns over rate hikes, prompting foreign capital to sell off leading stocks at any cost. The index plunged → hit the liquidation threshold → forced passive sell-off → further sharp decline in the index, triggering a death spiral. Those once-celebrated AI narratives became worthless in the face of liquidation. As market insiders said, "Leverage is an accelerator when prices rise, but a bomb when they fall." This crash was a complete defeat of "individual narratives" in the face of the "macro torrent."