Key Takeaways
- • Foreign investors sold a net 530 billion won ($373 million) of Kospi main-board shares on Tuesday, reversing two sessions of net buying and erasing the index's recent rebound, according to the Korea Exchange.
- • The Kospi fell 3.73% to close at 5,552.74, its lowest close in more than six months, since early April.
- • Foreign net selling this month has exceeded 18 trillion won ($12.7 billion) across nine of 12 sessions, approaching the 21.52 trillion won recorded in September.
- • Samsung Electronics and SK hynix account for nearly 80% of foreign net selling this month; SK hynix alone accounts for over 10 trillion won, more than half the total.
- • Market participants suspect leveraged AI-focused hedge funds are being forced to liquidate, with Value Aligned Research Advisors (VARA) cited as the focus of current rumors.
Summary
Foreign selling resumed on the Korea Exchange on Tuesday after a two-session pause, wiping out the Kospi's recent rebound. According to the exchange, foreign investors sold a net 530 billion won ($373 million) of shares on the main board during regular trading. The benchmark Kospi plunged 3.73% to close at 5,552.74, its lowest closing level in more than six months. Foreign investors have sold more than 18 trillion won ($12.7 billion) on a net basis so far this month, selling in nine of the month's 12 sessions, and cumulative selling is approaching the 21.52 trillion won recorded in September.
Samsung Electronics and SK hynix account for nearly 80% of foreign net selling this month, with SK hynix alone representing more than 10 trillion won, over half the total. Foreign ownership of SK hynix fell to 48.81% on Tuesday, its lowest level since 2022, while Samsung Electronics' foreign ownership has declined to around 46%, a level last seen during the 2008 global financial crisis.
Market analysts suspect that much of the foreign selling in Korean semiconductor stocks reflects technology-focused hedge funds. According to Goldman Sachs data, hedge funds investing in Asia have suffered the heaviest losses among global peers, and the selling has spread to technology stocks across the region. Goldman Sachs' prime brokerage desk reported that hedge funds unwound technology positions between Oct. 9 and 15 at the fastest pace since 2016. Some participants have raised concerns about a repeat of the turmoil linked to Situational Awareness, the AI-focused fund founded by former OpenAI researcher Leopold Aschenbrenner, which was cited as a catalyst for the global technology selloff in July.
Current liquidation rumors center on Value Aligned Research Advisors (VARA), a hedge fund co-founded by former BlackRock executive Ben Hoskin. VARA has invested heavily in AI-related companies including Micron, Nebius, CoreWeave and Sandisk, whose shares have recently declined sharply. Kim Byung-yeon, head of investment strategy at NH Investment & Securities, said some analysts believe the market's steep decline may have occurred as VARA liquidated positions in companies such as CoreWeave, adding that liquidations by leveraged funds may have disrupted supply and demand in the Korean market and intensified foreign selling. Market experts expect foreign investors to remain cautious about returning to Korean equities until major upcoming events pass, including the U.S. midterm elections on Nov. 3 and Anthropic's anticipated initial public offering later this year.
Samsung Electronics and SK hynix account for nearly 80% of foreign net selling this month, with SK hynix alone representing more than 10 trillion won, over half the total. Foreign ownership of SK hynix fell to 48.81% on Tuesday, its lowest level since 2022, while Samsung Electronics' foreign ownership has declined to around 46%, a level last seen during the 2008 global financial crisis.
Market analysts suspect that much of the foreign selling in Korean semiconductor stocks reflects technology-focused hedge funds. According to Goldman Sachs data, hedge funds investing in Asia have suffered the heaviest losses among global peers, and the selling has spread to technology stocks across the region. Goldman Sachs' prime brokerage desk reported that hedge funds unwound technology positions between Oct. 9 and 15 at the fastest pace since 2016. Some participants have raised concerns about a repeat of the turmoil linked to Situational Awareness, the AI-focused fund founded by former OpenAI researcher Leopold Aschenbrenner, which was cited as a catalyst for the global technology selloff in July.
Current liquidation rumors center on Value Aligned Research Advisors (VARA), a hedge fund co-founded by former BlackRock executive Ben Hoskin. VARA has invested heavily in AI-related companies including Micron, Nebius, CoreWeave and Sandisk, whose shares have recently declined sharply. Kim Byung-yeon, head of investment strategy at NH Investment & Securities, said some analysts believe the market's steep decline may have occurred as VARA liquidated positions in companies such as CoreWeave, adding that liquidations by leveraged funds may have disrupted supply and demand in the Korean market and intensified foreign selling. Market experts expect foreign investors to remain cautious about returning to Korean equities until major upcoming events pass, including the U.S. midterm elections on Nov. 3 and Anthropic's anticipated initial public offering later this year.
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