KOSPI Falls 28% Since June High as Leverage ETF Deleveraging 75% Complete, JP Morgan Says

According to JP Morgan on July 21, South Korea's main stock index KOSPI has fallen about 28% since its June 19 peak of 9,385.59, with the decline largely driven by deleveraging of leverage exchange-traded funds (ETFs). JP Morgan's analysis shows that leverage ETF liquidation is approximately 75% complete as the market self-corrects from rapid leverage accumulation over the past year.

The South Korean leverage ETF asset base shrank from $50 billion at the end of June to $26 billion following the recent market correction. The bank noted that foreign selling pressure is easing as the memory semiconductor sector's weight in outflows declines. JP Morgan maintains an "Overweight" rating on Korean stocks and keeps its 12-month KOSPI target at 12,500, citing sustained AI investment demand and improving corporate fundamentals.