On July 21, the GF Strategy team noted that the recent KOSPI decline exhibits characteristics of 'low valuation and high panic.' The index has retreated significantly from its June peak, yet valuations remain at historical lows, indicating that the decline is not primarily driven by valuation bubbles. The risks stem more from the over-concentration of weights in Samsung Electronics and SK Hynix, as well as market concerns over AI capital expenditure, memory景气 (sentiment), and earnings sustainability. Leverage in the South Korean stock market mainly comes from margin financing, leveraged ETFs, and on- and off-exchange derivatives, which differ significantly in terms of investment entities, transmission mechanisms, and risk transparency. Currently, the scale of domestic leveraged ETFs in South Korea has been reduced by 28.3%, while margin financing has only fallen 9.3% from its peak, indicating that it is still in the early stages of deleveraging. On-exchange derivatives remain at historical highs, suggesting that deleveraging is gradually transitioning from leveraged ETFs to margin financing and derivatives. The current KOSPI deleveraging has begun, but the progress in clearing margin leverage and trading structure leverage is clearly diverging. The expansion of leveraged ETFs has been the main source of increased leverage in the funding side during this period. Currently, after the early sharp decline and redemptions, South Korean retail investors have shown signs of a slight rebound in net subscriptions. Historical experience shows that deleveraging typically goes through 'an initial rapid release—rebound with leverage rebalancing—multiple rounds of oscillating reduction—return to historical averages,' and the complete process may take about a year. Considering that margin financing and derivative deleveraging in South Korea are still insufficient, and ETF funds have experienced periodic inflows, it is too early to conclude that the current deleveraging has ended. Overall, KOSPI is still in a phase of deep price adjustment and initial leverage release, but has not yet formed a systemic liquidity crisis. The current ratio of unsettled margin calls remains within a normal range, indicating no large-scale margin shortfalls or forced liquidations among retail investors. However, the coexistence of foreign and institutional position reductions, retail absorption, and leveraged fund inflows leaves the market in a relatively unstable period of chip redistribution. Going forward, three risk transmission chains should be closely monitored: first, widening net outflows from foreign investors and weakening retail absorption, driving the market from chip switching to incremental selling; second, leveraged ETFs shifting from contrarian subscriptions to redemption on declines; third, simultaneous deterioration in margin financing, derivative margin requirements, and unsettled margin calls, which could escalate local adjustments into a resonance of active and passive deleveraging.