1.2m Korean margin calls rock Asian chip stocks
A wave of forced liquidations among leveraged South Korean retail traders is driving a technical sell-off across Asian semiconductor equities, even as sector fundamentals remain robust.
South Korea’s market collapse has triggered margin calls for 1.2 million retail investors, forcing the liquidation of roughly 350,000 trading accounts this week alone. According to a client note from Goldman Sachs trader Ioannis Blekos, the figure represents over 3% of the country's adult population, highlighting the systemic risk posed by highly leveraged retail speculation.
The forced unwinding of these positions spilled over into broader Asian markets on Friday, even as the Korean exchange remained closed for a national holiday. Japanese chipmakers bore the brunt of the selling, with Kioxia Holdings slumping 16%, while Ibiden, Tokyo Electron and Sumco fell between 8% and 10%.
Taiwan Semiconductor Manufacturing Company dropped 7% despite posting a beat-and-raise second-quarter earnings report on Thursday. The selloff tracked a 4% drop in the Philadelphia Semiconductor Index, pushing the benchmark 19% below its 2026 peak and to the edge of a technical bear market.
The divergence between falling stock prices and rising corporate earnings underscores that this is a positioning unwind rather than a fundamental shift. Companies like ASML and Micron have recently reported robust results, with chipmakers universally citing demand that continues to outstrip supply. Prior to this week, the sector had posted massive 2026 gains, with Kioxia up 359%, SK Hynix up 172%, and Samsung up 112%.
"Good news cannot lift a stock, the market is no longer trading the news," market commentator Stephen Innes wrote. "It is trading the weight of everyone already sitting in the position." Innes noted that the Korean crash demonstrates "how quickly a normal correction can become mechanical when leverage, margin calls and rising volatility begin feeding one another."
Some institutional investors are already viewing the rout as a valuation opportunity. Citi analyst David Chew noted that exchange-traded funds tracking Korea and Taiwan saw inflows of $6.4 billion and $2.8 billion respectively this week. South Korea also recorded its first weekly international inflow in months at $500 million. Appetite for the sector was further underscored in China, where the $8.6 billion IPO of semiconductor company CXMT was 250 times oversubscribed.
Policymakers are simultaneously moving to prevent a repeat
