TLDR
- South Korean student Lee Seung-ho used 500% margin debt to build a large stock gain.
- Forced liquidations erased nearly 300 million won in gains within four weeks during market swings.
- South Korea’s margin loan balances reached a record 38.63 trillion won on June 24.
- Regulators banned new single-stock leveraged ETF listings after approving the products two months earlier.
- High housing costs and fast market gains are driving young investors toward leveraged trading.
Lee Seung-ho built a large trading gain after using a 500% margin loan through his stock trading app. The Seoul university student had saved 20 million won during mandatory military service before turning it into a 15-fold gain.
The rally did not last after sharp swings in South Korean stocks triggered forced liquidations by his brokerage. His account fell below the original amount he invested, leaving him under heavy stress. Lee said, “I literally could not breathe.”
Lee still plans to return to trading once he rebuilds enough capital. He said, “But I’m sticking to margin loans,” arguing that leverage can build wealth faster when markets move in the right direction.
His case reflects a wider retail trading culture in South Korea, where young investors often use borrowed money to chase market gains. High housing prices have also pushed some younger traders to seek faster routes toward wealth.
Regulators Move Against Leveraged Products
South Korea’s Kospi recently became one of the world’s strongest stock indexes after more than doubling within six months. The sharp rally later turned unstable, with the index falling more than 10% several times in a few weeks.
Margin loan balances in the domestic stock market reached a record 38.63 trillion won on June 24, according to the Korea Financial Investment Association. By July 15, balances remained high at 34.37 trillion won.
Broader Bank of Korea data placed total investor debt above 60 trillion won at the end of May. That figure includes other borrowing tied to stock investing and came during a period of strong market volatility.
Authorities moved to reduce risk by banning new listings of leveraged exchange-traded funds tied to individual stocks. The decision came about two months after regulators had approved those products.
Policy Error Debate Grows
Market strategist Inki Cho described the reversal as a correction of a known “policy error.” He said the Financial Supervisory Service governor had already admitted the products were approved too quickly.
Cho warned that leveraged products create uneven risk for retail investors. He said losses can accelerate much faster than gains when markets become unstable.
Lee said he understands the risk, but he compared leveraged trading to poker. He said investors can avoid repeated losses if they only use borrowed money when the odds appear strongly in their favor.
Regulators now face pressure to manage borrowing without shutting retail investors out of the market. The debate centers on whether tighter rules can reduce forced losses while keeping access open for smaller traders.
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