📉 JPMorgan: Korean stock leverage has fallen 75%, but foreign capital has pulled out more than $110 billion

JPMorgan maintains an Overweight rating on Korean equities, with a 12-month KOSPI target of 12,500 points. Core logic: the recent plunge is leverage deleveraging, not a reversal in fundamentals. The size of leverage ETFs has fallen from $50 billion to $26 billion, a reduction of about 75%; the long/short ratio has dropped from 5.5x to below 4x. Retail margin financing accounts for only 0.5% of market cap, so the risk is controllable.
However, foreign investors have net sold more than $110 billion since the start of the year, with 90% of the outflow coming from two storage leaders. JPMorgan attributes this to passive selling pressure caused by index weight adjustments, rather than a broad-based bearish view. This suggests: even if fundamentals don’t change, index weighting and capital flows alone can trigger massive volatility.
On fundamentals, AI infrastructure, security spending, and corporate governance reform still provide mid-term support. But the market’s doubts about AI monetization have not gone away; whether Korean stocks can regain investor favor after deleveraging depends on whether the profit expectations for the storage leaders stabilize.
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