CITIC's warning suggests Korean equities remain vulnerable to further bouts of forced selling, with liquidation rates still running six to eight times above levels seen in stable markets. The sharp one day drop in brokerage margin balances signals that deleveraging pressure has not yet fully worked through the system, which could keep volatility elevated and weigh on sentiment toward Korean equities in the near term. CITIC's point about the limited size of Korea's stabilisation fund, alongside the moral hazard risk tied to National Pension Service intervention, suggests policymakers have constrained tools to cushion further downside if liquidations continue at their current pace. Investors with exposure to Korean equities, particularly leveraged retail heavy segments, may want to watch daily margin balance and liquidation data closely for signs the unwind is nearing completion.---CITIC Securities is one of China's largest investment banks and securities firms, headquartered in Beijing, with operations spanning brokerage, investment banking, asset management and research across Asian and global markets. The firm is widely regarded as a bellwether for Chinese institutional views on regional markets and regularly publishes research covering equity markets across Asia, including South Korea.---CITIC Securities warns Korean equities remain exposed to further forced selling even after a rapid unwind in retail leverage.Summary:CITIC Securities says South Korean retail equity leverage has been rapidly unwound but risks remainBrokerage margin balances fell 10% in a single day on July 31, the largest one day drop this yearRetail forced liquidations exceeded 100 billion won per day on July 30 and 31The liquidation rate remains around 7 to 8%, well above the roughly 1% level typical of stable marketsKorea's stabilisation fund has limited firepower, while National Pension Service intervention carries moral hazard riskCITIC expects market volatility in South Korea to remain relatively elevatedCITIC Securities has warned that the deleveraging process in South Korean equities is not yet complete, even after a rapid unwind in retail investor leverage over recent weeks, and expects market volatility to remain relatively elevated as a result.In its latest note, CITIC pointed to a sharp reduction in on-exchange leverage, noting that brokerage margin balances in South Korea fell 10% in a single day on July 31, the largest such drop recorded this year. The firm said this scale of decline indicates leverage is still being cut quickly across the market, suggesting the deleveraging process remains active rather than nearing completion.Retail investors bore much of the pressure, with forced liquidations exceeding 100 billion won per day on both July 30 and July 31. CITIC noted that the liquidation rate has remained around 7 to 8%, a level well above the roughly 1% typically seen in stable market conditions, underscoring how much stress remains in the system despite the pace of deleveraging already observed.The firm also flagged limitations in South Korea's policy response options. It noted that the country's market stabilisation fund is limited in size relative to the scale of the deleveraging pressure, while intervention by the National Pension Service, one of the world's largest pension funds and a major domestic institutional investor, carries moral hazard risk given its potential to distort market pricing and encourage excessive risk taking if investors come to expect repeated support.Taken together, CITIC said these dynamics point to continued elevated volatility in South Korean equities in the near term, as the market works through the remaining leverage overhang without the benefit of a clearly defined backstop. This article was written by Eamonn Sheridan at investinglive.com.