JPMorgan: KOSPI Deleveraging Nearing End, Bottom May Be Approaching
N.R. Finch
J.P. Morgan strategist Mixo Das says the KOSPI has fallen nearly 40% since late June, but leveraged-ETF forced selling is largely done and hedge-fund deleveraging is roughly 90% complete — suggesting the sell-off's structural driver is fading and a bottom may be near.
Down 40% — who has been selling?
Das identifies the core driver as deleveraging, not deteriorating fundamentals — investors carrying leveraged positions were forced to sell to repay borrowed money.
This means → prices fell not because companies got worse, but because borrowed-money bets unwound in a cascade of forced selling.
Leveraged-ETF forced liquidations — funds that amplify bets with borrowed capital — are now largely complete, and hedge-fund deleveraging is about 90% done.
The forced selling is fading — what comes next?
Das argues that as passive sell pressure clears, the Korean market should find price support.
He highlights that Korea's "positioning is broadly attractive, complemented by cheap valuations and earnings momentum."
In plain terms = the forced sellers are nearly finished; the remaining holders are there by choice, which makes the price floor firmer.
What happened to Samsung and SK Hynix?
The KOSPI is still up 34% year-to-date, driven largely by Samsung Electronics and SK Hynix, both beneficiaries of the AI-demand surge.
But both stocks have been hit hard since late June; SK Hynix's slide deepened after its Q2 earnings missed expectations.
This reflects a market fear that memory-chip gross margins — the share of revenue left after production costs — have peaked for this cycle. The easiest-money phase may already be over.
What near-term risks remain?
Das flags the upcoming Fed rate decision and a wave of big-tech earnings as potential sources of short-term caution.
On sector allocation, he recommends consumer, biotech & pharma, and banks as diversification plays in the current environment.
This means → even if a bottom is near, short-term turbulence is still possible; whether deleveraging has truly cleared is the key checkpoint for judging if the KOSPI can stabilize.
Content is for reference only, not financial advice.