Overnight, the Philadelphia Semiconductor Index finally ended its eight-session losing streak. Western Digital rose more than 6%, and SK Hynix ADR followed with a nearly 5% gain, making it look as though the darkest days for the memory sector might be over. But as Asian trading opened today, the KOSPI gapped down more than 2%. Hynix slid from around 986 to 927, falling more than 5% intraday and wiping out all of last night’s gains in U.S. stocks in one fell swoop. This sharp divergence between the U.S. and South Korean memory sectors is rare even by the standards of the past few years.
The selloff has been highly systematic. Foreign brokerage desks, including HSBC and JPMorgan, topped the sell lists. In the first half of October, foreign investors sold more than 9 trillion won worth of Hynix shares; combined with Samsung, the total exceeded 14 trillion won, accounting for 80% of foreign outflows from the KOSPI over the same period. Foreign ownership of Hynix has fallen below its 10-year average, while Samsung’s has returned to 2008 levels. For foreign investors, the Korean market is almost a proxy for a single memory stock. Any slight cooling in the global AI narrative can mechanically trigger algorithmic selling, with little regard for how the companies’ quarterly results actually look.
A deeper crack in the cross-market linkage lies in the fact that the U.S. dollar index has recently remained elevated, while Treasury yields have stayed high. This has continued to siphon foreign capital away from emerging markets. With the won under pressure, foreign withdrawals from Korean equities are driven not just by sector fundamentals, but also by currency movements and interest-rate differentials. Gold has also remained strong over the same period, with safe-haven flows and dollar assets squeezing emerging-market equities from both sides. This explains why U.S. memory stocks can rebound while their Korean counterparts are hammered: in the same industry, where capital flows in or out depends entirely on the market in which the stocks are based.
The position of South Korea’s National Pension Service (NPS) makes this story even more troubling. Samsung and Hynix alone account for more than 70% of the total decline in the value of the NPS’s holdings. From the end of June to mid-October, the market value of its holdings evaporated by nearly 182 trillion won. The risks of a national pension fund placing such a heavy bet on a single sector have been amplified to the extreme by foreign investors’ systematic retreat. Meanwhile, the passive buying that had previously been supported by buybacks from Samsung and Hynix is now winding down, and the market is losing its last cushion.
For crypto markets, this cross-market capital-siphoning effect is also worth watching. Historically, the combination of a strong dollar and high Treasury yields has been unfavorable for risk assets overall. But crypto assets have recently shown signs of becoming less sensitive to these factors, diverging subtly from markets like Korean equities that are seeing concentrated foreign outflows. The key questions going forward are whether Treasury yields can retreat from current levels and when selling pressure from foreign investors in Asian equities will begin to show signs of exhaustion. These two variables will determine both whether Korean stocks can recover their lost ground and where global risk appetite heads next.
The selloff has been highly systematic. Foreign brokerage desks, including HSBC and JPMorgan, topped the sell lists. In the first half of October, foreign investors sold more than 9 trillion won worth of Hynix shares; combined with Samsung, the total exceeded 14 trillion won, accounting for 80% of foreign outflows from the KOSPI over the same period. Foreign ownership of Hynix has fallen below its 10-year average, while Samsung’s has returned to 2008 levels. For foreign investors, the Korean market is almost a proxy for a single memory stock. Any slight cooling in the global AI narrative can mechanically trigger algorithmic selling, with little regard for how the companies’ quarterly results actually look.
A deeper crack in the cross-market linkage lies in the fact that the U.S. dollar index has recently remained elevated, while Treasury yields have stayed high. This has continued to siphon foreign capital away from emerging markets. With the won under pressure, foreign withdrawals from Korean equities are driven not just by sector fundamentals, but also by currency movements and interest-rate differentials. Gold has also remained strong over the same period, with safe-haven flows and dollar assets squeezing emerging-market equities from both sides. This explains why U.S. memory stocks can rebound while their Korean counterparts are hammered: in the same industry, where capital flows in or out depends entirely on the market in which the stocks are based.
The position of South Korea’s National Pension Service (NPS) makes this story even more troubling. Samsung and Hynix alone account for more than 70% of the total decline in the value of the NPS’s holdings. From the end of June to mid-October, the market value of its holdings evaporated by nearly 182 trillion won. The risks of a national pension fund placing such a heavy bet on a single sector have been amplified to the extreme by foreign investors’ systematic retreat. Meanwhile, the passive buying that had previously been supported by buybacks from Samsung and Hynix is now winding down, and the market is losing its last cushion.
For crypto markets, this cross-market capital-siphoning effect is also worth watching. Historically, the combination of a strong dollar and high Treasury yields has been unfavorable for risk assets overall. But crypto assets have recently shown signs of becoming less sensitive to these factors, diverging subtly from markets like Korean equities that are seeing concentrated foreign outflows. The key questions going forward are whether Treasury yields can retreat from current levels and when selling pressure from foreign investors in Asian equities will begin to show signs of exhaustion. These two variables will determine both whether Korean stocks can recover their lost ground and where global risk appetite heads next.