SOUTH KOREA FIRST TO MARKET

Research evidence excerpt

SOUTH KOREA FIRST TO MARKET

Asia Pacific Equity Research

South Korea First to Market 30 July 2026

Top Stories

Korea Equity Strategy (Mixo Das)

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

The Korea market has undergone an intense period of de-leveraging since mid-June. The KOSPI index is now down almost

-40% from the peak on 22 June in a highly volatile move. What was triggered by routine fundamental concerns and rotational

flow was amplified by leveraged ETFs, and in recent days increasingly has the hallmarks of hedge fund positioning unwind.

Following our update last week (where we estimated that leveraged ETF unwind was 75% through and equity H/F de-

leveraging >50% through), we now believe that leveraged ETF unwind is complete and hedge funds are done with ~90%

of de-leveraging (both to acceptable levels). While it is likely that the price damage we have seen this week 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 of a rate hike) and hyperscaler earnings (high expectations), the positioning setup in Korea now appears

attractive on balance – and complements the cheap valuations and earnings momentum.

| Korea Aerospace Industries (Simon Han) (047810 KS, N)

Downgrade to Neutral; earnings cut inevitable after 2Q miss; order pathway remains cloudy

We downgrade KAI to Neutral with a Dec-27 PT of W130K following a disappointing 2Q26 print and still-limited near-term order

visibility. While revenue was broadly in line with expectations, 2Q OP materially missed on a combination of W19B one-off

provisions, export margin pressure from FX-driven cost headwinds, and a weaker domestic margin profile amid the absence/

delay of LAH-related sales.