The most volatile phase of Korean stocks may have ended, and the volatility fell back to a two-month low after “deleveraging”

Comparing news, the worst phase of the South Korean stock market turmoil may be over. Previously, historic sell-offs had eliminated leveraged positions, and regulatory restrictions also led to a sharp drop in transactions in some high-risk products. Last week, the South Korean stock market volatility index fell to a two-month low, having previously reached a record high in June. This stable situation has benefited from mandatory liquidation, which helps reduce outstanding margin debt; at the same time, stricter regulation of leveraged ETFs has also reduced the trading volume and asset size of products related to chip giants Samsung Electronics and SK Hynix.

These signs suggest that some of the surplus funds from the sharp fluctuations in local stock markets, which were previously exacerbated by leverage, have now been cleared. Morgan Stanley estimates that the deleveraging process is more than half complete. The KOSPI index fell nearly 40% from its June high, and global funds have sold more than $100 billion of Korean stocks this year, weakening the position of emerging market funds in the country.