Facing the wave of selling: Taiwanese and Korean retail investors buck the trend and increase leverage, vowing to hold onto AI chips.

During the market sell-off triggered by the war in Iran, individual investors in Taiwan and South Korea generally chose to maintain their leverage positions. This behavior highlights the strong demand resilience for the two major technology-intensive markets in Asia. Data shows that as of Monday last week, the margin balance in the Taiwan stock market only slightly decreased by 5%, but still remains at a high level range since 2007. In South Korea, according to data disclosed by the Korean Financial Investment Association, the outstanding margin balance reached a historical high last week - peaking at 337 trillion Korean won (approximately $230 billion) on Thursday, and slightly falling on Friday. It is understood that the military conflict between the US, Israel, and Iran directly triggered a global risk-off flight of funds, with the benchmark KOSPI index in South Korea setting a historical one-day decline record of 12.06% in early March 2026, triggering market circuit breakers multiple times. At the same time, the Taiwan stock market also faced heavy pressure due to profit-taking in the semiconductor sector, with significant outflows of funds from areas like chips that were previously hot. However, the relatively stable margin balances in Taiwan and South Korea further confirm investors' steadfast belief in the artificial intelligence theme. As the biggest beneficiaries of the surging demand for advanced chips in Asia, both the Taiwan and South Korean stock markets had already reached historical highs before the outbreak of the Middle East conflict. Lombard Odier's strategist in Singapore, Li Haomin, pointed out, "The painful memory of missing the market bottom in April 2025 may inhibit aggressive position changes." He further analyzed that although the ongoing Middle East conflict continues to pose risks of energy supply disruptions, which may prompt some investors to reassess their position allocations, retail traders may still capture the game space of so-called "TACO trades (Trump always creates opportunities)." Although leveraged bets are often seen as potential triggers for market volatility, the margin balances in China's Taiwan and South Korea account for less than 1% of the total market capitalization, showing that overall risks are still within a controllable range. Specific data supports this: the margin balance in the Taiwan stock market decreased by 5% compared to the previous week to 372 billion New Taiwan dollars (approximately $11.7 billion); in contrast, when the Trump administration announced a comprehensive increase in tariffs in April this year, traders concentrated on deleveraging by about 28% in a week, a decrease far exceeding the current level. Meanwhile, a unique phenomenon is emerging in the Korean market - stocks positions that are forcibly liquidated due to insufficient additional margin are often quickly picked up by other investors intending to lever up. Fibonacci Asset Management's CEO, Jung In-yoon, explained, "This explains why the Korean index is showing intense fluctuations and seesaw movements, rather than significant deleveraging." He further added, "The deeper driving factor is that the Korean stock market has been a relatively underperforming market in Asia for over a decade. Even after the recent rebound, its valuation is still relatively attractive when measured against global standards, continuously attracting investors back in."