South Korean student’s 5x leveraged stock gains disappear amid market volatility

ME News reports that on July 21 (UTC+8), 24-year-old South Korean university student Lee Seung-ho used a trading app with 5x leverage to grow his savings of 200 million KRW, accumulated during mandatory military service, to nearly 3 billion KRW—approximately 15 times his initial capital. However, following severe market volatility in South Korea in May, his broker triggered consecutive margin calls, causing all gains to vanish within four weeks and his account balance to fall below his original investment. Lee said the pressure at the time left him feeling like he “could barely breathe,” but he still plans to resume leveraged trading after rebuilding his capital. Lee stated his goal is to purchase a home in Seoul, where the average apartment price equals roughly 14 years’ salary. Some young Koreans believe traditional wealth accumulation paths are no longer viable, so they view highly leveraged stock trading as a way to catch up with rising asset prices. He noted that 5x leverage can multiply wealth growth fivefold during market rallies, but also acknowledged that consistently holding full positions ultimately leads to losses. Data from the Korea Financial Investment Association shows that South Korea’s margin loan balance reached a record high of 38.63 trillion KRW on June 24 and remained at 34.37 trillion KRW as of July 15. Broader statistics from the Bank of Korea reveal that, including other forms of borrowing, total investor debt first exceeded 60 trillion KRW by the end of May. During the same period, the KOSPI index surged more than double within six months, but subsequently experienced multiple declines exceeding 10% over the following weeks. South Korean regulators have announced a suspension of new listings for single-stock-linked leveraged ETFs—products that were only approved about two months ago. Inki Cho, strategist at Exness, said this move represents a policy correction following the regulators’ hasty approval of such products; in highly volatile markets, leveraged instruments can amplify losses downward far faster than they generate gains upward. (Source: BlockBeats)