JPMorgan Chase's latest research report on the Korean stock market today concludes that the current sharp decline in the Korean stock market is mainly due to the forced liquidation of excessively accumulated leveraged positions (especially leveraged ETFs). Significant progress has been made in deleveraging, and the most intense selling phase may have passed. The market is gradually returning to normalcy. Sort out the core content and key points of the research report: 1. Progress in deleveraging: substantial progress has been made in deleveraging 1) About 75% reduction in leveraged ETFs: The size of South Korean leveraged ETFs has significantly shrunk from a high of $50 billion at the end of June to about $26 billion, and it is expected that the deleveraging process has been completed by about 75%. The tightening of regulations (such as raising margin thresholds and restricting the listing of new products) is expected to further reduce leverage. 2) Hedge fund deleveraging exceeds 50%: The long short leverage ratio of hedge funds has fallen from its high point (over 5.5 times) to within 4 times, the deleveraging progress has been completed by over 50%, and crowded positions have been cleared to a considerable extent. Overseas investors tightened their leverage through securities exchange tools before June. After deleveraging, JPM's own main brokerage account's long short leverage ratio fell from a high of over 5.5 times to less than 4 times. 3) The risk of retail financing is limited: The balance of individual margin has fallen from its high point to about 21 billion US dollars, and the leverage level is no longer high. Retail investors have sufficient floating profits, cash, and overseas assets to cope with additional margin, and their financing portfolios do not have the foundation to trigger systemic risks. Unlike leveraged index funds that passively close positions when they fall, margin trading and securities lending have buffer mechanisms and investors have the freedom to operate independently. Korean retail investors hold a large number of stocks with floating profits, cash deposits, stable income, and overseas assets. If they want to retain their positions, they fully have the funds to respond to margin calls. Xiao Mo believes that retail financing channels will not trigger systemic deleveraging risks. 2. Market downturn and capital outflow: pressure has been partially released 1) Main cause of decline The recent sharp decline in KOSPI (down about 29% from its June peak) is not due to a fundamental collapse, but rather the automatic rebalancing of leveraged ETFs and hedge fund liquidation amplifying the downward trend, coupled with risk control adjustments in a high volatility environment. 2) Slow outflow of foreign capital Since the beginning of this year, the net outflow of foreign investment has exceeded 110 billion US dollars, but about 90% of the selling orders are concentrated in two storage stocks, Samsung Electronics and SK Hynix (due to passive reduction caused by hitting the fund's holding limit). With the decline in stock prices, the selling pressure on these two stocks has temporarily eased, and the outflow of foreign capital has slowed down. As mentioned in yesterday's tweet, foreign investors have started to resume attempting net purchases. 3. Market prospects and investment advice 1) Risk release nearing completion Although deleveraging has not yet fully ended, a considerable portion of the mechanical selling that previously suppressed the market has been digested, and marginal selling is drying up, resulting in a significant decrease in tail risk. 2) Layout timing approaching JPMorgan Chase believes that this round of decline is not a typical bear market caused by the collapse of company profits. As long as the fundamentals (such as AI and the structural advantage of Korean companies' profits) are maintained, the market is gradually approaching a stage where it can be laid out in batches based on performance and valuation. This article is sponsored by @ bitget_zh, titled 'Bitget Buying US Stocks: Instant Entry, Smooth Trading'