Key Takeaways
- • Foreign investors net-sold 26 trillion won in Korean securities over 13 trading days from September 28 to October 16, according to the Korea Exchange, with net buying on only two days in the period.
- • Samsung Electronics fell 17.8% and SK Hynix dropped 24.3% in the week of October 12–16, their largest weekly declines since the 2008 global financial crisis.
- • Foreign ownership of KOSPI market capitalization fell to 37.38% on October 16, its lowest level in six months.
- • Goldman Sachs data show hedge funds net-sold a global AI stock basket from October 8–14, unwinding all long positions built since early last year, with selling volume 3.5 times their short-selling volume.
- • Analysts cite fund liquidation rumors, the U.S. midterm elections on November 3, Middle East tensions and rate pressures, while KOSPI's forward P/E of 4.9x remains far below the U.S. (19.3x), Japan (15.6x) and Taiwan (18.8x).
Summary
Foreign selling in Korean equities has accelerated, driven by a combination of hedge fund de-risking, fears of fund liquidations and a broader shift toward cash ahead of the U.S. midterm elections. According to the Korea Exchange, foreigners net-sold 26 trillion won of securities on the stock market over 13 trading days, from September 28 to October 16. The pressure has been concentrated in semiconductors. Samsung Electronics and SK Hynix recorded their largest weekly declines since the 2008 financial crisis in the week of October 12–16, and foreign ownership of KOSPI market capitalization slipped to 37.38% on October 16, the lowest level since April.
The selling has been fed by renewed concern over leveraged AI positioning. Rumors spread on U.S. social media on October 15 that AI-focused hedge fund Value Align Research Advisors (VARA), founded by former BlackRock executive Ben Hoskin and algorithmic trader David Field, was liquidating holdings after unsustainable losses. As of end-June, VARA reportedly held significant stakes in Bloom Energy and Nebius (each about $1.7 billion), CoreWeave (about $1.1 billion), and AI hardware names including Micron, SanDisk and Seagate. The article recalls the July collapse of Situational Awareness (SA), the fund run by OpenAI researcher Leopold Aschenbrenner, which had used up to four times leverage to buy semiconductor and AI infrastructure stocks. After rival funds targeted its holdings, SA sold its public shares at fire-sale prices to Citadel, led by Ken Griffin. During that episode, foreigners net-sold 11.9005 trillion won of KOSPI stocks over four sessions from July 24 to 29.
Beyond individual funds, Goldman Sachs data show hedge funds net-sold a global AI basket of semiconductors, data centers and power stocks from October 8 to 14, unwinding long positions accumulated since early last year at the second-fastest pace in the past year. The Korea Capital Market Institute attributed the selling to surging bond yields, concerns over AI profitability and efforts to realize gains before late-October year-end settlements. Capital exiting AI has moved into defensive sectors such as healthcare and consumer staples, amplifying volatility in the KOSPI, which is heavily weighted toward memory chips.
Analysts describe the market's position as cheap but unsupported by demand. Korea Investment & Securities data show the KOSPI's forward P/E of 4.9x, versus 19.3x in the U.S., 15.6x in Japan and 18.8x in Taiwan, as of October 15. Samsung Electronics completed its 15 trillion won buyback on October 6, and SK Hynix is expected to finish its 40 trillion won buyback around October 20. The securities industry sees a rebound as dependent on foreign investors returning, with potential catalysts including Samsung and SK Hynix earnings later this month, the November 3 midterm elections and Anthropic's IPO in mid-November.
The selling has been fed by renewed concern over leveraged AI positioning. Rumors spread on U.S. social media on October 15 that AI-focused hedge fund Value Align Research Advisors (VARA), founded by former BlackRock executive Ben Hoskin and algorithmic trader David Field, was liquidating holdings after unsustainable losses. As of end-June, VARA reportedly held significant stakes in Bloom Energy and Nebius (each about $1.7 billion), CoreWeave (about $1.1 billion), and AI hardware names including Micron, SanDisk and Seagate. The article recalls the July collapse of Situational Awareness (SA), the fund run by OpenAI researcher Leopold Aschenbrenner, which had used up to four times leverage to buy semiconductor and AI infrastructure stocks. After rival funds targeted its holdings, SA sold its public shares at fire-sale prices to Citadel, led by Ken Griffin. During that episode, foreigners net-sold 11.9005 trillion won of KOSPI stocks over four sessions from July 24 to 29.
Beyond individual funds, Goldman Sachs data show hedge funds net-sold a global AI basket of semiconductors, data centers and power stocks from October 8 to 14, unwinding long positions accumulated since early last year at the second-fastest pace in the past year. The Korea Capital Market Institute attributed the selling to surging bond yields, concerns over AI profitability and efforts to realize gains before late-October year-end settlements. Capital exiting AI has moved into defensive sectors such as healthcare and consumer staples, amplifying volatility in the KOSPI, which is heavily weighted toward memory chips.
Analysts describe the market's position as cheap but unsupported by demand. Korea Investment & Securities data show the KOSPI's forward P/E of 4.9x, versus 19.3x in the U.S., 15.6x in Japan and 18.8x in Taiwan, as of October 15. Samsung Electronics completed its 15 trillion won buyback on October 6, and SK Hynix is expected to finish its 40 trillion won buyback around October 20. The securities industry sees a rebound as dependent on foreign investors returning, with potential catalysts including Samsung and SK Hynix earnings later this month, the November 3 midterm elections and Anthropic's IPO in mid-November.
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