Samsung Electronics, SK Hynix Leveraged ETFs: Foreign Share 0.76%

Signals From Samsung Electronics and SK Hynix ETFs

The key supply-demand (order flow) takeaway is not that foreign investors made a strong bet on either a rise or fall in Samsung Electronics or SK Hynix, but that they reduced exposure across high-risk ETFs in both directions. According to Korea Exchange (KRX) data cited by Maeil Business Newspaper Securities, foreign ownership of 14 single-stock leveraged ETFs tracking the two stocks averaged just 0.76% as of the 26th. That is roughly one-fifth of the 4.13% recorded in early August.

Single-stock leveraged ETFs amplify gains and losses from movements in a specific stock, while inverse 2X products magnify gains and losses from declines. The simultaneous drop in holdings of both bullish and bearish products therefore cannot be interpreted as a straightforward bullish or bearish signal for share prices.

Sharp Shift in Foreign Ownership of SK Hynix Leveraged ETFs

The differences by product are pronounced. Foreign ownership of Hana Asset Management’s single-stock leveraged ETF tracking SK Hynix fell from 0.46% in early August to 0.01% on the 26th. Over the same period, ownership of Shinhan Asset Management’s product dropped from 7.09% to 0.06%.

Foreign ownership of the TIGER SK Hynix Single-Stock Leveraged ETF shrank from around 9% in early August to around 1% recently. Similar shifts across several products make the trend difficult to attribute to only a handful of ETFs. The data confirms only the decline in ownership; transaction details by investor type and the reasons for the decrease were not available.

KODEX Ownership Ratio and Holdings Value Require Separate Analysis

The KODEX SK Hynix leveraged ETF managed by Samsung Asset Management appeared to follow a different pattern. Foreign ownership rose from around 3% as of August 3 to nearly 6% recently. Based on the percentage alone, foreign participation appears to have increased.

However, the same product’s total net assets fell by more than 60%, from about 3.1 trillion won on August 3 to roughly 1.2 trillion won recently. When total net assets—the denominator—have contracted, a higher ownership ratio alone does not establish that the value of foreign holdings increased. This case shows why both ownership percentages and asset size must be considered when assessing ETF supply-demand (order flow).

Directional Exposure Also Declines in Spot Trading

SK Hynix spot-market trading provides a similar signal to its leveraged ETFs. In August, foreign investors purchased an average of 2.5 trillion won and sold 2.8 trillion won per day. Since the start of this month, average daily purchases have fallen to 1.2 trillion won and sales to 1.7 trillion won.

Because both purchases and sales declined, the data points more toward reduced trading exposure than an aggressive expansion of a one-way position. An asset-management industry official said, “Because leveraged and inverse 2X products amplify gains and losses from share-price movements, investors have a strong incentive to reduce their positions when conviction about the market’s direction weakens.”

Decline in Inverse 2X Holdings Limits Bearish Interpretation

Two single-stock inverse 2X products are currently listed on the domestic stock market. Foreign ownership of the SOL SK Hynix Futures Single-Stock Inverse 2X fell from 43.57% in early August to around 9% on the 26th. Foreign ownership of the PLUS Samsung Electronics Futures Single-Stock Inverse 2X ETF also declined from around 44% to around 24% over the same period.

Ownership declined not only in leveraged products exposed to gains but also in inverse 2X products exposed to declines. Characterizing the data as a one-sided bearish bet against Samsung Electronics and SK Hynix would therefore fail to explain the supply-demand (order flow) in inverse 2X products. The confirmed change is a reduction in foreign-investor exposure to amplified profit-and-loss structures, rather than a directional reversal.

Conditions That Would Separate Bullish and Bearish Scenarios

The bullish scenario would gain support if foreign ownership of leveraged ETFs recovers. An accompanying increase in spot purchases would provide further evidence that investors are again willing to assume upside risk. Conversely, supply-demand (order flow) pressure would persist if spot sales continue to exceed purchases and foreign ownership of leveraged products keeps declining.

If foreign ownership of inverse 2X products rises again, investors should separately assess whether downside exposure is increasing. As long as both leveraged and inverse 2X positions continue to decline, it remains difficult to determine a specific share-price path. Future ETF fund flow and the share prices of Samsung Electronics and SK Hynix cannot be established from this data alone.

Figures Investors Should Monitor Next

• 14 leveraged products: Watch whether foreign ownership recovers from its 0.76% average on the 26th.
• KODEX: Track not only foreign ownership of the SK Hynix leveraged ETF but also changes in total net assets, which have fallen to roughly 1.2 trillion won.
• Spot supply-demand (order flow): Compare whether average daily foreign purchases or sales of SK Hynix increase.
• Two inverse 2X products: Monitor whether foreign ownership of the SOL SK Hynix Futures Single-Stock Inverse 2X and PLUS Samsung Electronics Futures Single-Stock Inverse 2X ETF continues to decline.

This article was automatically summarized and analyzed based on the original news report. View the original article (Maeil Business Newspaper Securities)