The most turbulent phase of the South Korean stock market may have passed, with volatility falling to a two-month low after deleveraging

Odaily News – The worst of the turmoil in South Korea's stock market may be over. The historic selloff has cleared leveraged positions, and regulatory restrictions have led to a sharp decline in trading of certain high-risk products. Last week, the Korea stock market volatility index fell to a two-month low, after hitting an all-time high in June. This stabilization is attributed to forced liquidations, which have helped reduce outstanding margin debt. Meanwhile, stricter regulations on leveraged ETFs have also reduced the trading volume and asset size of products linked to chip giants Samsung Electronics and SK Hynix.

These signs indicate that much of the excess capital that had amplified the recent sharp market swings through leverage has now been cleared. Morgan Stanley estimates that the deleveraging process is more than half complete. The KOSPI index has fallen nearly 40% from its June peak, while global funds have sold over $100 billion worth of Korean stocks this year, leaving emerging market funds with a weakened position in the country.