South Korea waives credit loan collateral requirements to stabilize stock market

The South Korean government has announced a three-month exemption of the 140% collateral maintenance requirement for credit loans, effective November 9. This measure, decided during an emergency market situation meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il, aims to prevent a surge in forced liquidations, known as “ban-dae-mae-mae,” which can exacerbate stock market volatility during sharp price declines.

The decision follows significant volatility in the KOSPI and KOSDAQ, triggered by global uncertainty following the U.S. midterm elections and concerns regarding potential regulations on AI data centers. These factors led to a sharp drop in U.S. tech stocks and the Philadelphia Semiconductor Index, impacting South Korean markets. During one session, the KOSPI triggered a circuit breaker as it fell below the 5,000 level.

Officials noted that while external factors are causing market fluctuations, South Korea’s economic fundamentals remain strong, with projected growth in the mid-3% range and rising exports. The government will continue to monitor global semiconductor trends and capital flows in real time, preparing additional stability measures if volatility increases further.