The Korean bull market is collapsing, and hedge funds have already cut their positions by half. This round of deleveraging in Korea has been extremely aggressive. Hedge funds' net exposure to Korean stocks has been slashed by half compared to the July peak, now sitting at around 4%, the lowest level in recent months. In plain terms, hedge funds are really selling Korean stocks. Another key metric is the long-short ratio. Back in June, it was close to 5x, but now it has dropped to about 2.7x, also the lowest since early May. So, the recent rapid decline in the Korean stock market, the fastest since the global financial crisis, is clearly driven by institutional deleveraging. When the Korean stock market was rising earlier, a lot of capital piled into long positions simultaneously. Hedge funds increased their net exposure, retail investors in Korea ramped up margin positions, and the scale and trading volume of single-stock leveraged ETFs surged. Funds were concentrated in highly liquid index-heavy stocks like SK Hynix and Samsung. This dynamic gave the Korean stock market strong upward momentum during rallies, but it also amplifies declines. This is because hedge funds don't use completely unconstrained long-term capital. When stock prices fall, fund net asset values drop, portfolio volatility increases, and risk budgets shrink. The leverage and positions that could previously be maintained are forced to contract. As a result, funds need to reduce their long exposure, and the stocks they sell further depress prices, triggering the next round of position cuts. This is one of the reasons behind the recent rapid sell-off in Korea. But the biggest issue right now is that while Korea's leveraged positions have been significantly reduced, the absolute levels are still very high. The current net exposure of around 4% has been halved since July, but it's still about 4x the mid-2025 levels. The long-short ratio tells a similar story. It's now around 2.7x, which seems like a big drop from nearly 5x, but looking at historical data since 2018, only about 22% of the time has the ratio been higher than it is now. In other words, we're still sitting around the 78th percentile. There's still a long way to go before full deleveraging. In mid-2022, hedge funds' net exposure to Korean stocks was only a quarter of what it is now. Even after this aggressive round of sell-offs and position cuts, we haven't returned to those levels. @Gate Crypto, US stocks, Hong Kong stocks, Korean stocks, gold, CFDs, prediction markets—all in one place for trading.