Is Korea facing a Minsky moment? The Flying Dutchman

Research evidence excerpt

Is Korea facing a Minsky moment? The Flying Dutchman

14 July 2026

Equity Strategy

Asia The Flying Dutchman

Is Korea facing a Minsky moment?

◆ Leverage – the main factor that has driven the market up in Herald van der Linde*, CFA

the past few months – could go into reverse Head of Equity Strategy, Asia Pacific

The Hongkong and Shanghai Banking Corporation Limited

heraldvanderlinde@hsbc.com.hk

◆ What’s different from previous cycles is that underlying +852 2996 6575

earnings growth remains strong Prerna Garg*

Asia Equity Strategist

◆ Aside from this, market psychology is also increasingly prerna.garg@hsbc.com.hk

important +852 9831 6901

Adam Qi*

Associate, Equity Strategy

A Minsky moment? A Minsky moment is a sudden fall in a market after a prolonged The Hongkong and Shanghai Banking Corporation Limited

rise. It typically occurs when investors – most of whom have borrowed money – are adam.x.l.qi@hsbc.com.hk

+852 2288 9311

forced to sell assets to cover mounting interest payments or margin calls, triggering a

market correction and a sudden loss of liquidity. In Korea, many investors have built

* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

exposure to Korea stocks through borrowing and leveraged products. Now, as the not registered/ qualified pursuant to FINRA regulations

market falls the margin calls arrive, and losses can be material. The very factor that

allowed the market to rise in the past few months could now go in reverse.

Leverage ETFs. Korea equities have seen unprecedented volatility so far this year

that is being further amplified by single-stock leveraged ETFs. After the recent sell-

off, the combined value of these single-stock leveraged ETFs has already halved to

USD14.5bn from the peak on 25 June.