HSBC has raised its rating on South Korean equities to overweight from neutral after concluding that the market's recent pullback flushed out a large amount of excess leverage. Strategists led by Herald van der Linde said volatility remains elevated but has retreated from its peak. The bank added that if South Korean stocks continue to outperform, active funds may struggle to increase positions without breaching concentration limits, a dynamic that could trigger ongoing selling. Even so, HSBC said firm domestic demand for shares should keep that pressure from becoming a major obstacle.