What Awaits Retail Investors Who Joined the Rally? Surge in Kioxia Margin Sell-Offs Raises Alarm in Japan

Margin Buying During the Japanese Stock Rally from April to June
Concerns Over a Flood of Forced Selling as Year-End Maturity Approaches

Weak Share Price Could Drop Further
Nervous Retail Investors Buy and Sell Repeatedly
But Some

Kioxia, a NAND flash company that has driven the Japanese stock market this year, is now struggling under the burden of leveraged investments. As individual investors who bought on margin during the surge from April to June rush to cut their losses each time the stock price rebounds, the resulting sell-offs are suppressing upward momentum. There are growing concerns that as the year-end margin trading maturity approaches, the pressure from potential sell-offs could intensify further.

On October 6, the Nikkei reported on this situation by highlighting the case of a man in his 40s living in Tokyo. This investor purchased Kioxia shares on margin in June and now faces maturity in December. However, as the stock price fell, his unrealized losses approached 11 million yen (approximately 93.71 million won), according to the Nikkei.

He stated, "I am hoping the stock price rises even a little before then," adding, "I've already given up on breaking even; if I can get out with a loss of around 5 million yen (about 42.59 million won), that would be fortunate."

A Kioxia employee in Japan is inspecting the finished product. Kioxia.

Kioxia's share price has soared by 400% so far this year, with most of the rally concentrated between April and June. Notably, in the final week of June, when the stock hit its peak, the margin buying balance swelled to its largest level since Kioxia went public in 2024. Even in July, when the stock price plummeted, individual investors continued to buy on margin in hopes of buying the dip, the Nikkei added.

However, as with this case, individual investors who bought Kioxia shares on margin during this rally face another critical test at year-end. In Japan, there are two types of margin trading: general margin trading and institutional margin trading, with the latter being the main form. Institutional margin trading generally requires investors to settle their positions through an offsetting transaction within six months. Thus, those who bought on margin during the April to June surge face deadlines to unwind their positions between the end of this year and the beginning of next. The Nikkei explained that if a wave of loss-cutting sell-offs occurs at that time, there is a significant risk of further declines in Kioxia's share price.

As of October 2, outstanding margin purchases of Kioxia stood at 848.7 billion yen (7.2303 trillion won). Based on their book value and the current share price, individual investors' estimated valuation losses amount to 48.3 billion yen (4.1148 billion won), which, according to the Nikkei, is the highest among Nikkei 225 constituents.

The stock's price action demonstrates this supply-demand imbalance. On October 1, when Kioxia’s share price rose over 5.5% from the previous day, the margin purchase balance shrank by 5.3%. Even on October 2, when the share price rose 1%, there was a further 0.2% decrease. In contrast, on September 28, when the price fell by over 4%, margin purchase balances jumped by 5.5%. This has created a repeating cycle where price increases prompt loss-cutting sales, and price drops attract renewed bottom-fishing via margin buying.

This investor also attempted so-called "averaging down," buying an additional 200 shares every time the price fell after initially acquiring 100 shares on margin in June. Nevertheless, his average cost per share, adjusted for a stock split, remained at 31,000 yen (about 264,175 won), far higher than the current price of 19,120 yen (162,936 won).

The Nikkei analyzed that individual investors continue to buy the dip—despite their losses—because they expect earnings to improve amid growing demand from the artificial intelligence (AI) sector. However, the outlet also cautioned that the accumulated margin buying could itself become a constraint on further price gains.

This content was produced with the assistance of AI translation services.