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The bulk of foreign investors' net selling in the Kospi market in the first half of this year was concentrated in Samsung Electronics and SK hynix, data showed.

Even as the two stocks surged on improving semiconductor industry conditions, foreign capital flowed out of the blue-chip chipmakers as profit-taking, portfolio rebalancing and a rising won-dollar exchange rate all converged. Funds pulled from the semiconductor sector rotated into next-generation AI investment beneficiaries such as Samsung Electro-Mechanics.

According to Korea Exchange, foreign investors net sold a total of 149 trillion won ($95.9 billion) in the Kospi market, excluding exchange-traded funds, in the first half of this year. Of that, net selling in Samsung Electronics came to 72.6 trillion won, while SK hynix accounted for 57.1 trillion won. Combined, the two stocks represented 129.7 trillion won in net selling — roughly 87 percent of total foreign net selling in the Kospi for the first half.

Foreign selling continued Wednesday. Within the first 30 minutes of trading, foreign investors net sold approximately 2.3 trillion won in the Kospi market. Including the alternative exchange, net selling approached 2.5 trillion won. Individual investors, by contrast, net bought around 2.1 trillion won, providing support at the lower end of the index, while institutional investors posted net purchases of around 300 billion won.

The Kospi fell sharply in response, opening down 370.31 points, or 4.46 percent, at 7,933.10 and extending losses through the early session. A sidecar — a temporary halt on program sell orders — was triggered as the early-session decline intensified. Samsung Electronics led the drop, falling 7.79 percent to slip below the 300,000 won mark, while SK hynix dropped 8.24 percent to the 2.3 million won range.

The semiconductor industry outlook has continued to improve, driven by expanding AI investment and rising demand for high-bandwidth memory, yet foreign investors have been cutting their exposure to the sector's largest names.

Warnings that the AI rally may be approaching its peak have also emerged. According to CNBC on June 30 (local time), Burry disclosed in a Substack post to investors that he had taken short positions in Nvidia, Applied Materials, Tesla, the iShares Semiconductor ETF and Caterpillar.

Burry singled out the large-scale investment plans announced by Korean memory chipmakers on Monday as a signal that the AI investment cycle has peaked. "I think this is the beginning of the end," he wrote, adding, "It's only a matter of time now."

The prevailing view in the brokerage community, however, is that the foreign selling largely reflects profit-taking after sharp share price gains, combined with global funds adjusting their exposure.

In practice, foreign selling was concentrated around quarterly rebalancing periods. At the start of each quarter — in January and April — net purchases of 149.3 billion won and 1.23 trillion won, respectively, actually flowed in. February and May coincide with MSCI quarterly and semi-annual rebalancing, while March and June fall at quarter-end, leading analysts to characterize the foreign flow pattern as driven primarily by passive fund rebalancing.

Accordingly, some in the brokerage community have raised the possibility that, with the passive selling that weighed on first-half flows having largely wrapped up by late June, foreign capital could return in July as it did in January and April.

Foreign investors who sold heavily out of semiconductors in the first half rotated some of those funds into AI and power infrastructure-related stocks. Samsung Electro-Mechanics topped the foreign net purchase rankings for the first half, drawing approximately 2.3 trillion won in inflows. The buying reflects expectations that rising demand for high-value multilayer ceramic capacitors and substrates for AI servers will translate into improved earnings.

Shinhan Investment said Samsung Electro-Mechanics has entered a phase of structural growth after recently securing a series of large-scale supply contracts for silicon capacitors and MLCCs. Forecasting a demand-over-supply environment as demand for high-value components expands in the AI era, the brokerage raised its target price by 50 percent to 3 million won.

"The company has emerged as a leading global components maker, and the expansion of key product orders confirms its entry into a structural growth phase," said Oh Kang-ho, a research fellow at Shinhan Investment. "We view it as the top beneficiary in a demand-exceeding-supply market driven by growing sales of high-value AI-era products, and see both earnings and valuation moving higher together."

Doosan Enerbility ranked second in foreign net purchases for the first half, attracting approximately 1.7 trillion won. Buying was driven by expectations of rising power demand from the proliferation of AI data centers and increased investment in nuclear power plants.

NH Investment said Doosan Enerbility stands to benefit significantly if the United States moves ahead with expanding its nuclear power supply chain and South Korea's investment plans in the US gain momentum, given the company's role as a supplier of key equipment including reactors. The brokerage also forecast continued earnings improvement as the revenue share from high-margin nuclear and gas turbine businesses grows.

"The Trump administration's push for US investment ahead of the midterm elections will be accompanied by an expansion of the US government's nuclear industry revival policy," said Lee Min-jae, a researcher at NH Investment. "Doosan Enerbility is well-positioned to win orders for reactors, which are its core product."

Lee added that Kim Yong-beom, the presidential policy chief, had said that expanded domestic semiconductor factory and data center investment would drive long-term power demand growth, and that renewable energy alone would be insufficient to meet that increase — making it worth discussing the introduction of new nuclear plants in the 12th Basic Plan for Electricity Supply and Demand. "It will take a long time, but if it is chosen, it would be a positive development," Lee said.


th5@heraldcorp.com