[Soochow Strategy] Important Changes in Korea's Liquidity Conditions 2026/7/29

English summary

From a liquidity perspective, the Korean market is currently in a phase of 'repeated foreign inflows, diverging leverage, and bottoming sentiment.' Foreign capital has not yet formed a stable return; after a brief net inflow last week, it turned to net outflows again, indicating that overseas investor confidence remains fragile. Leveraged funds show signs of divergence: credit financing and securities pledge balances have rebounded from lows, possibly reflecting some high-risk funds starting to add positions at low levels; leveraged ETFs saw heavy volume turnover, suggesting panic selling while low-level buying support stepped in; meanwhile, forced liquidation volumes remained stable, implying that systemic stampede risk is controllable. Retail sentiment has cooled, net long positions in derivatives continue to shrink, and pre-deposited funds have rebounded from a trough, suggesting retail 'ammunition' is nearly exhausted and follow-up buying momentum is insufficient. Local institutional sentiment has picked up marginally, with short-selling pressure somewhat contained. On the long-term fund side, Korean 'pension and other' investors, including the National Pension Service, turned to net buying for the first time since July, providing incremental support to the market.…