BlockBeats News, August 9th. According to Bloomberg, the most intense turmoil sparked by the historic sell-off in the South Korean stock market may have come to an end. Forced liquidation of leveraged positions and tightened regulations have significantly reduced trading in some high-risk products. The South Korean stock market volatility index dropped to a two-month low last week, retreating from the record high set in June; Morgan Stanley estimates that the deleveraging process is more than halfway complete. The Korea Composite Stock Price Index retraced nearly 40% from its June peak, with global funds selling over $100 billion worth of South Korean stocks this year.

In June, the South Korean stock market volatility index surged to a record 96.9, compared to 28.9 by the end of 2025. The 20-minute trading halt mechanism set by the Korean Exchange was triggered four times in July, setting a historical record; this mechanism activates when the market drops by 8%. In nearly half of the trading days in July, the Korea Composite Stock Price Index experienced daily fluctuations of at least 5%, with a record 18% single-day surge on July 31st.

Subsequently, regulatory authorities took multiple measures to restrict the demand for leveraged products. Starting from July 31st, single stock leveraged ETFs required higher cash collateral, leading to a decrease in trading volume and asset size linked to funds related to Samsung Electronics and SK Hynix. Approximately 1 trillion Korean won, equivalent to $7.1 billion, of retail accounts were forcibly liquidated in June, with an additional 993 billion won liquidated in July, both reaching the highest levels this year. The balance of margin loans for stock financing dropped to 27.4 trillion Korean won as of August 4th, the lowest this year.

After the sell-off, South Korean stock valuations hit a low point, with the Korea Composite Stock Price Index (KOSPI) trading at a 12-month forward P/E ratio of 5.1 times, a historic low. However, overseas asset management institutions have not seen a significant inflow. Foreign investors sold a record $30 billion worth of South Korean stocks in June, followed by $6.2 billion in July and another $4.3 billion so far in August. Goldman Sachs maintains a 12-month target of 12,000 points for the Korea Composite Stock Price Index, representing about a 90% upside from last Friday's closing level. Timothy Moe, Chief Asia Pacific Equity Strategist at Goldman Sachs, stated that if volatility decreases, market fundamentals will come back into play, and these fundamentals are attractive.