South Korea Volatility Drops to Two-Month Low, Deleveraging Half Complete

KOSPI volatility hits two-month low as forced liquidations peak and margin loans drop to yearly lows, signaling potential end to severe market turmoil.

Woofun AI data shows that the volatility index for South Korea's stock market fell to its lowest level in two months last week, down from record highs in June. Morgan Stanley estimates that more than half of the deleveraging process has already been completed. The South Korea Composite Stock Price Index has pulled back by nearly 40% from its June peak, while global funds sold over $100 billion worth of South Korean stocks this year.

Regulatory measures, including higher cash margin requirements for single-stock leveraged ETFs starting July 31, reduced trading volumes for funds linked to Samsung Electronics and SK Hynix. Margin loan balances dropped to 27.4 trillion won as of August 4, the lowest level of the year. The 12-month forward P/E ratio stands at 5.1 times, a record low, though foreign investors continued selling $4.3 billion in August.