JPMorgan pointed out that forced deleveraging driven by leveraged ETFs was the main reason for the recent sharp decline in the South Korean KOSPI index. The institution analyzed that the liquidation of leveraged fund positions, rather than corporate earnings or fundamental deterioration, amplified market volatility. It is estimated that leveraged ETF assets have now shrunk to approximately $26 billion, and the deleveraging process is currently about 75% complete. The corporate fundamentals of the South Korean market remain solid, but strong deleveraging pressures have weighed on stock prices. The institution predicts that stronger regulatory measures by South Korean financial authorities, such as raising basic deposit margin requirements and suspending new listings of single-stock leveraged ETFs, will further promote the deleveraging process. The report also assessed that the leverage of hedge funds is also rapidly decreasing. JPMorgan stated that the scale of long-short positions under hedge fund management has dropped from over 5.5 times net assets to less than 4 times, with deleveraging estimated to be more than half complete. This year, foreign net selling of South Korean stocks is expected to exceed $110 billion, but about 90% of this is concentrated in memory semiconductor stocks. As the weight of memory stocks has recently declined, foreign selling pressure is gradually easing. The bank also remains optimistic about the medium- to long-term outlook. AI investment and data center investment remain solid, a slowdown in memory chip demand has not yet been confirmed, earnings improvements in the industrial, financial, and consumer goods sectors, as well as improvements in corporate governance, are also positive factors for the South Korean stock market. JPMorgan maintains an 'overweight' rating on the South Korean stock market and expects a 12-month target price for the KOSPI index of 12,500 points, consistent with its previous forecast. Its base case target is 12,500 points, bull case is 15,000 points, and bear case is 8,000 points. (Jin10)