Since July, foreign investor sentiment toward semiconductor stocks has been a roller coaster. Foreign investors, who sold a net more than 14 trillion won of SK hynix(000660) and Samsung Electronics(005930) early this month, appeared to come back by buying a net nearly 2 trillion won over the past two days, but turned net sellers again in just one day. It shows a standoff between the semiconductor peak theory and bargain-hunting sentiment.
According to the Korea Exchange (KRX) on the 16th, foreign investors bought a net 3.2862 trillion won on the KOSPI market over the two days of the 14th to 15th. That contrasts with their net selling of 14.0676 trillion won from the 1st to the 13th.
Buying focused on semiconductor stocks. Over the two days, foreign investors purchased 1.9958 trillion won worth of SK hynix and were net buyers of SK Square (259.2 billion won), Samsung Electronics (219.2 billion won), HANMI Semiconductor (184 billion won), and LG Innotek (123.9 billion won).
This is the opposite of the trend earlier this month, when they offloaded SK hynix (about 8 trillion won) and Samsung Electronics (about 6 trillion won) in concentrated selling. The two stocks ranked No. 1 and No. 2 in net foreign selling on the KOSPI market.
Since the listing of SK hynix American depositary receipts (ADR), the ADR has maintained a high premium over the common shares, drawing buying into the relatively undervalued common shares. In particular, as the ADR surged 27% on Nasdaq on the 15th, the gap between the ADR and the common shares widened to 51%.
Kim Jae-seung, an analyst at Hyundai Motor Securities, said, "An expanding ADR premium can increase the attractiveness of common shares to foreign investors," and added, "In the case of TSMC, when the ADR premium widened beyond 25%, global investors tended to buy the relatively cheaper common shares."
Analysts also said bargain hunting was spurred as share prices entered a technically oversold zone amid the spread of the "semiconductor peak theory." Kim Yong-gu, an analyst at Yuanta Securities Korea, said, "As the index's decline widened due to a semiconductor sell-off, foreign investors moved to bargain hunt, centered on semiconductors."
In fact, the KOSPI fell below the 6,500 level intraday on the 14th, with the 12-month forward price-earnings ratio (PER) dropping to around 6 times. That is below the level during the global financial crisis (6.27 times). The price-to-book ratio (PBR) of Samsung Electronics fell to 1.78 on the 13th, and SK hynix to 2.45, returning to March levels.
However, foreign investors turned net sellers again on the day. They sold a net 1.3885 trillion won on the KOSPI market. Selling was particularly heavy in semiconductor stocks. According to the Korea Exchange (KRX), the top net-selling stocks by foreigners were SK hynix (895.4 billion won), Samsung Electronics (218.2 billion won), and Samsung Electro-Mechanics (70.9 billion won).
Lee Kyung-min, an analyst at Daishin Securities, said, "A series of semiconductor-related negatives in the U.S. stock market the previous day has led to net selling by foreigners and institutions, centered on the semiconductor sector." Investor sentiment was dented by news that artificial intelligence (AI) cloud company CoreWeave is reviewing a hedging strategy using put options to guard against a potential drop in memory prices, and by reports that data center construction in New York has been halted due to power supply and environmental issues.
Brokerages see the possibility that foreign buying could resume if the exchange rate stabilizes. Kim said, "The sustainability of the rebound depends on the continuity of foreigners' net buying in the cash market," and projected, "If the won-dollar rate stabilizes on a Bank of Korea base rate hike, foreigners' capacity for net buying of semiconductors will also expand."