The Market's Tightrope Walk: Surge or Crash
The peak of the 'chicken game'
Right now, two huge pools of money, unprecedented in history, are colliding head-on in the market.
- Fuel for a rise (141 trillion won in short-selling standby funds): Latent buying pressure that could trigger a surge as buybacks (short covering) erupt if share prices rise further.
- The detonator for a fall (30 trillion won in margin loans): Latent selling pressure that could trigger a crash as forced liquidations (margin calls) pour out if share prices slip even slightly.
Assessment: Securities firms halting margin loans usually signals ‘the tail end of liquidity supply.’ With reduced capacity for further buying, this is judged to be *a ‘thin-ice peak’ where the market could collapse sharply even from a small shock.
Response Strategies by Scenario
Scenario A: KOSPI holds 5,300 and rises further
- What happens: Short covering by foreign investors flows in, causing a sharp rise (overshooting) led by large caps (Samsung Electronics, SK hynix, etc.).
- Strategy: “Enjoy it, but don't get drunk on it (Trailing Stop)” Each time the index rises, sell holdings in stages to raise cash. Refrain from new entries and leave this territory to existing holders.
- Rather than raising target prices, follow the rally by continually raising your profit-taking level (Stop-loss).
Profit-taking and correction
- What happens: Forced liquidations erupt, starting with stocks with high margin ratios, creating a plunge in which 'panic selling begets panic selling.'
- Strategy: “Cash is your oxygen mask” Never buy the dip in the early stage of the decline (a falling knife). Pick up blue chips after the first wave of forced liquidations has swept through (after confirming a sharp drop in margin balances).
Portfolio Strategy
① Increase your cash allocation
Why: Right now, 'survival' comes before 'chasing returns.' When a crash comes, cash becomes your most powerful weapon (an opportunity to buy at bargain prices).
② Avoid 'debt-fueled' stocks vs. select 'short-cover' stocks
You need to take a completely different approach to stock selection criteria.
| Category | Strategy | Characteristics of Target Stocks |
|---|---|---|
| Avoid (Danger) | Sell unconditionally / stay away | Small and mid caps with a margin balance ratio of 5% or more, and surging theme stocks. (Top targets for forced liquidation in a decline) |
| Watch (Opportunity) | Buy in stages during corrections | Large caps with good earnings but excessive short interest. (Can rise sharply through a short squeeze when share prices rise) |
③ Eliminate leverage (debt) completely
The fact that securities firms have blocked lending means risk is already at a dangerous level.
If you are currently using margin or unsettled credit, repay it immediately and switch to a cash account, regardless of whether you are in profit or loss. A single forced liquidation can make your account impossible to recover.
Concrete Action Plan
Urgent check of your holdings: Check the 'margin balance ratio' of your stocks. (Available in HTS/MTS). If the margin balance ratio is high, reduce your position.
Monitor foreign flows: Foreign investors are the ones holding the 140 trillion won in stock lending balances. If foreigners turn to double selling, 'selling futures + selling spot', during the session, take a defensive stance immediately.
Exploit volatility (for return seekers): When the market plunges, consider adding some inverse ETFs (which profit when prices fall) as a short-term hedge.
"Those who survive are the strong ones"
- Past data (2021, 2018, etc.) show that “in the battle between debt-fueled investing and short selling, the well-funded short sellers ultimately won, or debt-fueled retail investors wore themselves out and collapsed.”
- Now is the time to focus on ‘how to protect my assets’ rather than 'how much more can I make.' It is not too late to move after confirming which way the 140 trillion won in standby funds and the 30 trillion won debt bomb will go off. A conservative approach is strongly recommended.