Korea Equity Strategy: Update on the de-leveraging process in Korea (2)

Research evidence excerpt

Korea Equity Strategy: Update on the de-leveraging process in Korea (2)

J P M O R G A N Global Markets Strategy

29 July 2026

Korea Equity Strategy

Update on the de-leveraging process in Korea (2)

The Korea market has undergone an intense period of de-leveraging since mid- Equity Macro Research

ACJune. The KOSPI index is now down almost -40% from the peak on 22 June in a Mixo Das

highly volatile move. What was triggered by routine fundamental concerns and (852) 2800-0511

rotational flow was amplified by leveraged ETFs, and in recent days increasingly mixo.das@jpmorgan.com

has the hallmarks of hedge fund positioning unwind. Following our update last J.P.MorganMorganBrokingSecurities(Hong (AsiaKong)Pacific)LimitedLimited/ J.P.

week (where we estimated that leveraged ETF unwind was 75% through and equity

Stanley Yang

H/F de-leveraging >50% through), we now believe that leveraged ETF unwind (82-2) 758-5712

is complete and hedge funds are done with ~90% of de-leveraging (both to stanley.yang@jpmorgan.com

acceptable levels). While it is likely that the price damage we have seen this week J.P. Morgan Securities (Far East) Limited, Seoul

Branch

has residual spillovers into further de-leveraging over the coming days, and that

many investors continue to exercise caution into the FOMC this week (high risk Rajiv Batra

(65) 6882-8151

of a rate hike) and hyperscaler earnings (high expectations), the positioning setup rajiv.j.batra@jpmorgan.com

in Korea now appears attractive on balance – and complements the cheap J.P. Morgan Securities Singapore Private Limited

valuations and earnings momentum. Joy Wang

(852) 2800-2322

• De-leveraging update: (1) Leveraged ETFs AUM has normalized: joy.y.wang@jpmorgan.com

Leveraged ETFs with Korea underlyings grew to $50bn in AUM by late June. J.P.