South Korea eases leveraged investment rules to curb forced selling

South Korean authorities have moved to temporarily ease restrictions on leveraged investments in a bid to curb forced selling and stabilise financial markets after a sharp decline in equities pushed the benchmark stock index to a nine-month low.

According to Reuters, the country's finance ministry said on Friday that the requirement for securities firms to maintain collateral equivalent to 140% of credit lending to retail investors would be waived for three months starting Monday.

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The decision followed an emergency meeting on financial markets as authorities sought to prevent further volatility triggered by excessive forced selling amid the sharp stock market decline.

Reuters reported that the ministry said the temporary relaxation was aimed at preventing market volatility from intensifying due to forced liquidations. It added that additional measures would be prepared if market volatility continued to rise.

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The move underscores growing concerns among South Korean authorities over market instability and the risk that leveraged investors could face forced liquidations, adding to downward pressure on equities.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times.)