ChainThink reports that, on July 21, according to J.P. Morgan’s latest Korea equity strategy report, J.P. Morgan maintains an overweight rating on the Korean market, with the 12-month KOSPI target still set at 12,500 points.
The report states that the fundamental conditions of the Korean market remain solid, and the recent sharp decline in the KOSPI was primarily driven by deleveraging of highly leveraged funds, passive unwinding of leveraged ETFs, and portfolio rebalancing by funds.
The report notes that the KOSPI has declined approximately 28%-29% from its peak on June 22. J.P. Morgan believes this correction resembles a deleveraging of crowded trades rather than a systemic reversal in the fundamentals of Korean assets.
From the perspective of deleveraging progress, the scale of related leveraged ETFs in South Korea has decreased from a peak of approximately $50 billion to around $26 billion, representing about 75% deleveraging progress;
More than half of the stock long-short funds have completed deleveraging, and the long-short ratio on JPM Prime Book has declined from a peak of over 5.5x to below 4x.
Regarding retail leverage, South Korea's margin debt has declined from a peak of over $25 billion to approximately $21 billion, accounting for only 0.5% of the total market capitalization of the stock market.
Regarding foreign outflows, South Korea has seen foreign outflows exceeding $110 billion year-to-date, with approximately 90% coming from two memory chip leaders; J.P. Morgan noted that the related selling pressure has eased.