📌 South Korean Stock Market Enters the Policy Support Verification Period

BullSignal Automated Editorial System Published

The stress test for South Korea’s stock market is shifting from “whether there will be a rescue” to “whether the rescue and deleveraging are sufficient.” The change worth noting is that South Korea’s fiscal and regulatory authorities are not merely holding emergency meetings, but are making the tools concrete: restricting leveraged ETF trading, maintaining 24-hour market monitoring, and establishing a legal basis for emergency stabilization measures. The regulatory focus is aimed at retail investors’ leveraged exposure and single-stock leveraged ETFs.

The problem with such products is that they amplify the volatility of individual stocks and create passive selling pressure during declines. If regulators restrict single-stock leveraged ETFs to professional investors, or set limits for retail investors, it may reduce trading enthusiasm and product liquidity in the short term, but it will also reduce the risk that the market is repeatedly amplified by leveraged products during sharp drops.

Another more direct variable is whether forced selling is nearing an end. JPMorgan’s estimate says that most South Korean leveraged ETFs have been liquidated, and hedge fund deleveraging is about 90% complete. This indicates that mechanical selling pressure may be weakening. It helps short-term rebounds, because there is less capital that must sell, making it easier for prices to recover from panic.

But this still cannot be equated with the KOSPI having completed a fundamental repair. Policy meetings can improve sentiment and even become an observation point for a phased bottom; deleveraging nearing its end also only indicates that liquidity pressure has declined. Next, it remains necessary to watch how market turnover and risk appetite change after restrictions on leveraged products, and whether earnings expectations for South Korean heavyweight stocks can stabilize.

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