South Korea's worst phase of stock-market turbulence may have passed after a historic selloff flushed out leveraged positions and tougher rules curbed trading in some riskier products. The market's volatility index fell to a two-month low last week after reaching a record high in June, suggesting conditions have stabilized as forced liquidations cut outstanding margin debt and stricter oversight reduced activity in leveraged ETFs (funds that amplify market moves) tied to Samsung Electronics and SK Hynix. Those shifts indicate that part of the excess liquidity that had intensified pockets of sharp volatility has been cleared. Morgan Stanley estimates the deleveraging (reduction of borrowed exposure) process is more than halfway complete. Even so, the KOSPI (South Korea's benchmark stock index) has fallen nearly 40% from its June high, while global funds have sold more than $100 billion of Korean equities this year, leaving emerging-market funds with weakened exposure to the country.