Kioxia shares face headwinds from margin-buying gone wrong

Kioxia shares are facing downward pressure due to a buildup of leveraged long positions from investors who borrowed to buy the stock, anticipating a rise in its price. As of October 15, outstanding leveraged long positions in Kioxia's stock totalled about 920 billion yen (US$5.8 billion), the highest among all companies listed on the Tokyo Stock Exchange.

Trading activity in Kioxia has declined by 84% from its peak, with turnover shrinking to 766 billion yen, leaving some margin traders at risk of being forced to close out their positions at a loss. Analysts suggest that the problem lies in the extremely bloated margin buying, which could lead to a deeper fall if retail investors are compelled to sell their shares as margin deadlines approach.

Kioxia, a major Japanese stock by market capitalization, specializes in Nand flash memory used in AI servers. Its share price has fallen 63% from a June record high. Despite strong earnings outlook and a lower forward price-to-earnings ratio compared to its US peer SanDisk, few drivers suggest that trading intensity may return to its previous level.