Institutions sold off aggressively. Why did the share price of South Korean storage giant collapse?
Last Friday, South Korean semiconductor giant SK Hynix just rang the bell on Nasdaq and completed the issuance of American Depository Receipts (ADRs) in the United States. On the first day of listing, it soared 12.76%. However, as soon as the South Korean stock market opened on the 13th, SK Hynix opened sharply lower, and then the decline expanded. As of the close, it fell by more than 15%, and was reported at 1.845 million won per share (approximately 8,339.4 yuan at the current exchange rate). This is also the first time since June 11 that SK Hynix has fallen below the integer mark of 2 million won (approximately 9,000 yuan) in about a month.
Last Friday, South Korean semiconductor giant SK Hynix just rang the bell on Nasdaq and completed the issuance of American Depository Receipts (ADRs) in the United States. On the first day of listing, it soared 12.76%. However, as soon as the South Korean stock market opened on the 13th, SK Hynix opened sharply lower, and then the decline expanded. As of the close, it fell by more than 15%, and was reported at 1.845 million won per share (approximately 8,339.4 yuan at the current exchange rate). This is also the first time since June 11 that SK Hynix has fallen below the integer mark of 2 million won (approximately 9,000 yuan) in about a month. According to South Korea's Chosun Ilbo, on the 13th, foreign investors and institutional investors holding SK Hynix showed a net selling trend, with net sales of 973 billion won (approximately 4.38 billion yuan) and 316.5 billion won (approximately 1.42 billion yuan) respectively. Dragged down by the collapse of the semiconductor giant, the Korea Composite Index fell sharply that day. As of the close, the Korea Composite Index fell 8.95% to 6,807 points, triggering the circuit breaker mechanism during the session. This is also the first time in more than two months that the South Korea Composite Index has fallen below the 7,000-point mark since May 4. Although Samsung Electronics opened higher in early trading, it turned green during the session and fell by more than 10% by the close. At the broad market level of the Korean stock market, foreign investors and institutional investors sold net 2.2483 trillion won (approximately 10.12 billion yuan) and 572.7 billion won (approximately 2.58 billion yuan) respectively. It stands to reason that SK Hynix's listing on the US stock market and its sharp rise are a major benefit to boost the stock price, but this popularity has not been transmitted to the Korean domestic market. According to the aforementioned reports, affected by the plunge on the 13th, leveraged financial products linked to SK Hynix fell into losses across the board. KODEXSK Hynix, a single-target leveraged ETF product linked to SK Hynix, fell 14.13% from the previous day to 18,655 won (approximately 83.9475 yuan) as of press time on the 13th, which has fallen below the listing price of 27,775 won (approximately 124.9875 yuan). Sino-Singapore Jingwei noticed that Southern Double Long Hynix, which trades in the Hong Kong stock market, fell by more than 32% as of press time, to HK$60, a drop of nearly 69% from the previous high of HK$193.65. The first trigger for SK Hynix's decline may be that its performance was slightly lower than market expectations. According to the aforementioned report by Chosun Ilbo, brokerage analysts pointed out that SK Hynix’s consolidated operating profit in the second quarter of this year may be slightly lower than market expectations. Chae Min-sook, a researcher at Korea Investment Securities, released a research report on the 13th and estimated that SK Hynix’s consolidated revenue in the second quarter was 80.9 trillion won (approximately 364.05 billion yuan) and operating profit was 60.4 trillion won (approximately 271.8 billion yuan). Although it increased by 54% and 61% respectively from the previous quarter, it was about 8% lower than the market consensus of 65 trillion won (approximately 292.5 billion yuan) operating profit. Cai Minshu said: "Compared with peers, the company's high-bandwidth memory (HBM) revenue accounts for a higher proportion, and the average selling price (ASP) growth is lower than the industry average. The storage industry is shifting to a development model centered on long-term supply contracts of 3 to 5 years. Corporate valuation no longer depends solely on the average selling price increase in a single quarter, but on how long high profitability levels can be sustained." Bloomberg reported on the 13th that as of July 9, the 12-month dynamic price-to-earnings ratio of the Korea Composite Index (KOSPI) was only 6.35 times, lower than the 6.82 times recorded on October 26, 2008 during the most severe period of the financial crisis; compared with the 52-week peak of 11.98 times hit on October 27 last year, the current valuation is almost halved. Valuation levels for the Kospi have fallen to levels lower than during the global financial crisis. The deeper core reason is that global institutions are systematically adjusting positions and escaping from the single track of AI semiconductors. Bloomberg analyzed on the same day that two major negative sentiments in the market continue to suppress investment confidence in the semiconductor sector: First, the market is worried about the risk of overheating in cloud vendors' artificial intelligence infrastructure investments, and second, major technology companies have increased their deployment of self-developed AI chips. Global asset management institutions currently generally adopt a position diversification strategy to retain AI-benefiting stocks while reducing the risk of concentrated portfolio positions. Institutions such as JP Morgan Asset Management, GMO, and Invesco are broadening their investment tracks.
GMO Portfolio Manager Warren Chiang said: "The high concentration of individual stock holdings is by no means an ideal state for portfolio managers. We need to explore diversified investment opportunities as much as possible, but there are still inherent risks hidden in various assets." William Lin, co-head of Asia Pacific and emerging market equities at Invesco, said: "Since this year, I have reduced my holdings in Samsung Electronics by more than 60% to free up funds to increase my holdings in Korean non-technology stocks. It is crucial to protect customer assets and avoid the risk of excessive concentration in a single industry. Intensified industry competition, continued expansion of production capacity, and the inherent cyclicality of the storage industry, in the long run, the semiconductor sector's excess returns are likely to gradually narrow." Market opinion believes that the capital expenditure plans to be announced by major technology giants this month will become a key variable that affects the stock price trends of semiconductor manufacturing companies. The future performance of Samsung Electronics and SK Hynix is highly bound to the financial reports of leading technology companies. The Wall Street Journal previously analyzed that as long as a large technology company cuts investment in AI infrastructure, panic will spread to the entire technology stock sector. American financial media "Barron's" added: "The scale of investment in AI data centers by leading technology companies is too large, which has already exceeded the coverage of the company's own cash flow, and the subsequent related costs are likely to continue to rise." Microsoft and Google parent company Alphabet will release their second-quarter financial reports on July 28, while Meta and Amazon are scheduled to disclose their results on the 29th and 30th respectively. At the same time, the valuation reconstruction and supply expansion brought about by the listing of ADR have completely broken the original stock price balance. According to the U.S. Consumer News and Business Channel (CNBC), SK Hynix’s share price fell on Monday, which was considered to be profit-taking, coupled with market doubts about the valuation of the reasonable price difference between U.S. stock depositary receipts and Korean local stocks. Analysts said that the listing of ADR actually set a new reference standard for investors to evaluate the company's valuation. Daniel Liu, global strategist at Yuanta Securities, said: "At present, no one can figure out the follow-up trend of memory chip demand, and they can't find a fair stock price range. The core contradiction lies in the game between the scale of market demand and the volume of new supply in the future, and what the corresponding reasonable valuation multiple of the company should be." Daniel pointed out that after SK Hynix’s stock price fluctuated violently, its U.S. stock ADR showed a discount of more than 20% relative to South Korea’s local stocks. Daniel said that this round of selling stems from the issuance mechanism of this listing in the United States. This listing is an "new share issuance" and increases the supply of circulating equity in the market. "The market is viewing the current adjustment in SK Hynix's local stock price as a round of recovery." But he also said that given that the structural demand for AI continues to exceed supply, this correction is likely to be a short-term phenomenon; despite the intensification of short-term stock price fluctuations, the stock market is likely to return to an upward trend in the next 6 to 12 months. Philip Wool, chief research officer of Ruisi Global Consulting, is also bearish on the recent weakening trend of the Asian AI hardware sector. He believes that this is just an adjustment of the investment portfolio of institutions, not a deterioration of the industry's prospects. "This is mainly due to risk control considerations." Wuer explained that AI chip companies have experienced huge gains before, and many investors have already placed heavy positions. "Prudent risk management requires institutions to reduce their holdings of such heavy positions." He added that this round of selling does not mean that the market’s enthusiasm for investment in the AI hardware sector has cooled down. The current AI track investment layout is broadening from semiconductors, but memory chip suppliers (such as SK Hynix) can still continue to benefit from industry dividends. Dongcai Illustration·Add some useful information (
GMO Portfolio Manager Warren Chiang said: "The high concentration of individual stock holdings is by no means an ideal state for portfolio managers. We need to explore diversified investment opportunities as much as possible, but there are still inherent risks hidden in various assets." William Lin, co-head of Asia Pacific and emerging market equities at Invesco, said: "Since this year, I have reduced my holdings in Samsung Electronics by more than 60% to free up funds to increase my holdings in Korean non-technology stocks. It is crucial to protect customer assets and avoid the risk of excessive concentration in a single industry. Intensified industry competition, continued expansion of production capacity, and the inherent cyclicality of the storage industry, in the long run, the semiconductor sector's excess returns are likely to gradually narrow." Market opinion believes that the capital expenditure plans to be announced by major technology giants this month will become a key variable that affects the stock price trends of semiconductor manufacturing companies. The future performance of Samsung Electronics and SK Hynix is highly bound to the financial reports of leading technology companies. The Wall Street Journal previously analyzed that as long as a large technology company cuts investment in AI infrastructure, panic will spread to the entire technology stock sector. American financial media "Barron's" added: "The scale of investment in AI data centers by leading technology companies is too large, which has already exceeded the coverage of the company's own cash flow, and the subsequent related costs are likely to continue to rise." Microsoft and Google parent company Alphabet will release their second-quarter financial reports on July 28, while Meta and Amazon are scheduled to disclose their results on the 29th and 30th respectively. At the same time, the valuation reconstruction and supply expansion brought about by the listing of ADR have completely broken the original stock price balance. According to the U.S. Consumer News and Business Channel (CNBC), SK Hynix’s share price fell on Monday, which was considered to be profit-taking, coupled with market doubts about the valuation of the reasonable price difference between U.S. stock depositary receipts and Korean local stocks. Analysts said that the listing of ADR actually set a new reference standard for investors to evaluate the company's valuation. Daniel Liu, global strategist at Yuanta Securities, said: "At present, no one can figure out the follow-up trend of memory chip demand, and they can't find a fair stock price range. The core contradiction lies in the game between the scale of market demand and the volume of new supply in the future, and what the corresponding reasonable valuation multiple of the company should be." Daniel pointed out that after SK Hynix’s stock price fluctuated violently, its U.S. stock ADR showed a discount of more than 20% relative to South Korea’s local stocks. Daniel said that this round of selling stems from the issuance mechanism of this listing in the United States. This listing is an "new share issuance" and increases the supply of circulating equity in the market. "The market is viewing the current adjustment in SK Hynix's local stock price as a round of recovery." But he also said that given that the structural demand for AI continues to exceed supply, this correction is likely to be a short-term phenomenon; despite the intensification of short-term stock price fluctuations, the stock market is likely to return to an upward trend in the next 6 to 12 months. Philip Wool, chief research officer of Ruisi Global Consulting, is also bearish on the recent weakening trend of the Asian AI hardware sector. He believes that this is just an adjustment of the investment portfolio of institutions, not a deterioration of the industry's prospects. "This is mainly due to risk control considerations." Wuer explained that AI chip companies have experienced huge gains before, and many investors have already placed heavy positions. "Prudent risk management requires institutions to reduce their holdings of such heavy positions." He added that this round of selling does not mean that the market’s enthusiasm for investment in the AI hardware sector has cooled down. The current AI track investment layout is broadening from semiconductors, but memory chip suppliers (such as SK Hynix) can still continue to benefit from industry dividends. Dongcai Illustration·Add some useful information (