Sudden afternoon plunge! Japanese and Korean stock markets tumble together! Korean retail investors make a comeback, aggressively adding leverage again. Long leveraged CFD positions approach historic highs, only 40% margin needed for full market exposure, currently concentrated in chip stocks like SK Hynix and Samsung.

Today (July 22), Japanese and Korean stock markets fell sharply in the afternoon, with the Japanese stock market erasing a 2% gain from the morning session, and the Korean stock market losing almost all of its 6% early gains.

Market analysts pointed out that dual pressures led to sharp volatility in Japanese and Korean stocks today: first, the escalation of conflict in the Middle East led to a surge in oil prices, sparking inflation concerns and putting pressure on technology stocks such as semiconductor sectors;

Second, Korean retail investors have recently used "Contract for Difference" (CFD) leveraged tools extensively, with holdings approaching historical highs and concentrated in chip stocks. If stock prices continue to fall, margin calls and forced liquidations will be triggered, further intensifying market volatility.

According to Bloomberg, Korean retail investors keen on risk are flocking back to the leveraged tool "Contract for Difference" (CFD), which previously caused significant losses, raising concerns about increased volatility and sudden forced liquidations in the market.

The appeal of CFDs lies in their leverage: investors only need to deposit 40% margin to gain full market exposure. However, this tool, which was restricted in 2023 for causing market turmoil, has become active again at a rather sensitive time. Leveraged ETFs in chip stocks have already increased volatility, and Korean authorities have halted the introduction of new single-stock leveraged ETFs.

As of July 20, net long CFD positions in the KOSPI index were near historic highs. For individual stocks, SK Hynix's CFD positions soared nearly 2,500% to 235 billion KRW, while Samsung Electronics increased fivefold to 217 billion KRW; this derivative can even be linked to leveraged ETFs.