Despite concerns that on the 10th more than 1 trillion won worth of sell orders would flood the market, the share price shock for Samsung Electronics(005930) and SK hynix(000660) was limited. The day also saw the September Korea Exchange (KRX) sector index regular rebalancing, exchange-traded products (ETP), exchange-traded funds (ETF), exchange-traded notes (ETN) rebalancing, and simultaneous futures and options expirations coincide. Still, with both companies continuing share buybacks and arbitrage-driven buying absorbing supply, the large-cap semiconductor stocks ended slightly lower.
According to the securities industry on the 10th, the stocks with the biggest weight cuts in this regular rebalancing were SK hynix and Samsung Electronics. In the KRX Semiconductor Index, SK hynix's weight fell by 18.01 percentage points (p) from 38.01% as of the closing price on the 9th due to the 20.00% cap on individual stocks. Samsung Electronics also decreased from 22.06% to 20.00%, down 2.06%p.
Exchange-traded funds linked to the KRX Semiconductor Index alone hold about 8 trillion won in assets. The industry expected mechanical trading by passive funds to act as a significant supply-demand variable. Because passive funds that track the index must adjust their holdings to match the index composition and target weights by stock.
In particular, it was estimated that selling of about 1.24 trillion–1.45 trillion won in SK hynix and about 200 billion–240 billion won in Samsung Electronics, up to a total of 1.8 trillion won, would take place.
However, the expected shock did not materialize to that extent. On the day, SK hynix fell 3,000 won (0.16%) from the previous trading day to 1,853,000 won, and Samsung Electronics ended down 500 won (-0.19%) at 269,000 won. Compared with the KOSPI's 0.98% decline, both stocks saw relatively modest drops.
It appears that around the close, rebalancing-related sell orders intersected with futures-linked arbitrage buying. In the main board, financial investment institutions were net buyers of about 1.8 trillion won on the day, while foreigners and investment trusts were net sellers of roughly 1.5 trillion won and 400 billion won, respectively.
The securities industry believes financial investment institutions absorbed the sell orders from foreigners and investment trusts, easing the supply-demand shock from the rebalancing.
A market analyst in the securities industry who requested anonymity said, "Because the rebalancing supply was flagged in advance, a considerable portion appears to have been digested during the session," adding, "At the close, futures-linked arbitrage buying and passive selling overlapped, absorbing the rebalancing impact on large caps."
Passive funds freed up by cutting large-cap weights were reallocated to mid-to-upper semiconductor equipment and materials names within the index. HANMI Semiconductor's weight expanded from 6.40% to 9.62%, and Jusung Engineering from 3.92% to 5.89%. Wonik IPS (2.41→3.62%), EO Technics (2.40→3.61%), HPSP (2.22→3.34%), LEENO Industrial (2.12→3.19%), and DB HiTek (2.07→3.11%) also saw their weights increase.