JPMorgan Sees Korean Stock Bottom as Deleveraging Hits 90%

South Korea’s KOSPI has fallen nearly 40% from its June peak, pressured by a cascade of selling in leveraged exchange-traded funds and forced position cuts by hedge funds. The sharp retreat has highlighted how crowded, leveraged trades can amplify losses and drain market liquidity, while raising a central question for investors: whether the selloff has run far enough for valuations and fundamentals to reassert themselves.

JPMorgan said in its latest report that hedge-fund deleveraging is about 90% complete and that the unwinding of leveraged ETF positions has largely concluded, significantly easing selling pressure. The bank sees signs that a market bottom is taking shape and outlined four areas for investors to consider. Among the disclosed preferences are Korean banks and biotechnology companies, sectors it views as offering stronger fundamental support after the steep correction.