KOSPI 10% Crash, Nikkei Slump: Leverage Risks in Asia

Japan's Nikkei 225 fell 2.8% on Friday, reversing the previous session's gains as technology stocks took another hit. The broader Topix slipped 0.7%. Among the biggest decliners were Kioxia Holdings, SoftBank Group, Advantest, Tokyo Electron, and Taiyo Yuden.

Tokyo's core inflation accelerated for the first time in eight months, data showed. That strengthened expectations of further Bank of Japan rate hikes, adding to the negative sentiment.

South Korea's KOSPI index dropped 9.99% in a single session, triggering a 20-minute trading halt. Samsung and SK Hynix each fell more than 7%. Foreign and institutional investors sold heavily. Retail investors, meanwhile, made record net purchases of 11.55 trillion won, much of it funded by margin borrowing.

The sell-off erased more than ₩366 trillion ($246 billion) in market value. The Korea Exchange halted program selling after a brief market loss.

In Taiwan, securities firms reported trade defaults of $62 million in June, the highest monthly total since records began in 2019. Defaults have risen about 300% over the past two months. Margin purchases increased 160% over the past year to around $19 billion, near levels seen before the 2000 dot-com crash.

The sharp moves followed a strong rally driven by AI-related stocks. The leverage data across South Korea and Taiwan point to growing risk in Asian equity markets. Retail investors in South Korea alone bought a record 11.55 trillion won of stocks during the rout.