Is the market shakeout in South Korean equities nearing an end? Several Wall Street investment banks suggest the market may have already hit bottom.

① In July, South Korea’s stock market experienced sharp swings and frequent trading halts due to excessive leveraged trading, with the KOSPI index having fallen by one-third from its all-time high; ② Several Wall Street investment banks believe the outlook for South Korean equities has improved, as the deleveraging wave is nearing its end and major South Korean chipmakers are showing solid growth momentum; ③ According to JPMorgan data, deleveraging in Korean equity leveraged ETFs is largely complete, and hedge funds have finished approximately 90% of their deleveraging process.

cls.cnAug 3 21:44

Morgan Stanley upgrades South Korean equities to 'overweight': deleveraging is nearing completion, and valuations are highly attractive

Morgan Stanley has upgraded its rating on South Korean equities to "overweight," with a target level of 9,000 for the KOSPI index—implying 36% upside potential from current levels. The KOSPI’s forward price-to-earnings ratio has fallen to 5.7x, reaching a historic low. Hedge funds have completed approximately 75% of their deleveraging, and leveraged ETF assets have shrunk by 70% from their peak, significantly improving the market’s positioning structure. Capital management developments, HBM4 pricing dynamics, and the iPhone 18 launch cycle represent the three key catalysts for the next phase of gains in South Korean equities.

wallstreetcnAug 3 09:33

Foreign investors recorded a record net buying of KRW 7.2 trillion in a single day on Friday! Wall Street: The headwinds facing Korean equities have abated.

On July 31, foreign investors recorded a record single-day net purchase of KRW 7.2 trillion in South Korea's KOSPI market, significantly narrowing monthly selling pressure, while domestic pension funds also shifted from net sellers to net buyers. Meanwhile, regulators raised the leverage threshold for single-stock ETFs to curb volatility. Citi views these developments as a shift in funding conditions from headwinds to tailwinds and maintains its KOSPI target at 10,000 points.

wallstreetcnAug 1 19:50

South Korea tightens rules on leveraged ETFs on day one: trading volume drops 75%, KOSPI surges 18%, retail investors cry 'locked out'

Following South Korea's tightened financial regulations raising the threshold for single-stock leveraged ETF trading, turnover on the first day plummeted by 75.3%, demonstrating the immediate impact of the policy. However, the strong rebound in South Korean equities on the same day was not directly driven by the new rules; market participants attributed it primarily to foreign investors covering short positions, shifts in global capital flows, and a recovery from pessimistic sentiment. Analysts cautioned that the sustainability of the short-term rebound remains to be seen, as a confirmed trend reversal in South Korean equities has yet to materialize.

wallstreetcnJul 31 18:29

Annual Financial Report

HKEXJul 31 15:10

Emergency market rescue! Report: South Korean regulators plan to reinstate short-selling bans and narrow daily price limits by 30%.

South Korea's stock market continued to plunge sharply, prompting regulators to enter a state of full emergency preparedness. The Korea Exchange internally assessed the technical feasibility of suspending short selling and narrowing daily trading limits but publicly denied any immediate implementation. Calls to halt short selling have intensified; however, the government faces a dilemma: such a move could jeopardize South Korea's MSCI Developed Markets status, requiring careful balancing between market stability and its internationalization agenda.

wallstreetcnJul 30 19:22