JP Morgan says forced deleveraging driven by leveraged ETFs was the principal cause of the recent KOSPI collapse, not corporate earnings or fundamentals. It estimates leveraged ETF assets have fallen to about $26 bln and that roughly 75% of the deleveraging has already occurred. Stronger measures from Korean regulators — such as higher base deposit margin requirements and pausing new single‑stock leveraged ETF listings — could accelerate the unwind. Hedge funds’ long‑short exposure has declined

JP Morgan says forced deleveraging driven by leveraged ETFs was the principal cause of the recent KOSPI collapse, not corporate earnings or fundamentals. It estimates leveraged ETF assets have fallen to about $26 bln and that roughly 75% of the deleveraging has already occurred. Stronger measures from Korean regulators — such as higher base deposit margin requirements and pausing new single‑stock leveraged ETF listings — could accelerate the unwind. Hedge funds’ long‑short exposure has declined from over 5.5x net assets to under 4x, implying more than half of hedge fund deleveraging is complete. JP Morgan expects foreign net selling of Korean equities this year to exceed $110 bln, with roughly 90% concentrated in memory semiconductor names; as memory weight falls, external selling pressure should ease. The bank keeps an overweight on Korean equities and a 12‑month KOSPI target of 12,500 (bull 15,000; bear 8,000), citing intact AI and data‑center investment, an unconfirmed slowdown in storage demand, and improving earnings and governance across industrials, financials and consumer sectors.