Investing.com — The most severe phase of South Korea’s stock-market turmoil may have passed after forced liquidations reduced leveraged positions and tighter regulations curbed trading in high-risk products, Bloomberg reported.
A volatility index for Korean equities fell to a two-month low last week after reaching a record in June. Morgan Stanley estimated that the market’s deleveraging process is now more than halfway complete.
The Kospi Index had fallen nearly 40% from its June peak as leverage amplified sharp market swings. The volatility gauge surged to 96.9 in June from 28.9 at the end of 2025.
South Korea’s 20-minute market-wide trading halt, triggered by an 8% decline, was activated a record four times in July. The Kospi moved by at least 5% during nearly half of the month’s trading sessions, including a record 18% jump on July 31.
Regulators responded by increasing cash deposit requirements for single-stock leveraged exchange-traded funds from July 31. Trading volumes and assets subsequently fell in leveraged products linked to Samsung Electronics and SK Hynix.
Forced liquidations affected about 1 trillion won ($710 million) of retail accounts in June and another 993 billion won in July. Outstanding margin loans declined to 27.4 trillion won on August 4, their lowest level this year.
Foreign investors have slowed their retreat but continue to sell Korean equities. Overseas funds withdrew a record $30 billion in June, followed by $6.2 billion in July and $4.3 billion during the first part of August.
Investors are weighing continued volatility against low valuations and a strong earnings outlook for South Korea’s semiconductor companies. The Kospi is trading at a record low of 5.1 times projected 12-month earnings.
Goldman Sachs maintained its 12-month Kospi target of 12,000, implying roughly 90% upside from Friday’s close.
“We are getting constructive, but we’re still not fully comfortable because volatility still remains high,” Aberdeen fund manager Isaac Thong said.
Related articles
South Korea stock volatility eases as leveraged trades unwind
Berkshire’s profit doubles as equity holdings surge; buys back $4.5 bln shares
What happens to stocks when the Fed starts hiking? Barclays weighs in