"The most bullish stock market" suddenly faces a change! Large funds suddenly withdraw

According to the latest disclosed data, the nearly $23 billion (approximately 156 billion RMB) iShares MSCI South Korea ETF under BlackRock recorded a net outflow of $970 million last week, marking the largest single-week sell-off in history. Notably, the South Korean KOSPI index has already gained over 88% year-to-date in 2026, leading the major global indices.

Meanwhile, the movie “The Big Short,” based on the real story, features well-known investor Michael Burry warning that the “parabolic” surge in U.S. tech stocks is pushing their valuations to unsustainable highs, and the Nasdaq 100 index faces significant downside risk.

Sudden Capital Outflows

On the morning of May 12, Beijing time, after the opening of the Japanese and South Korean stock markets, most major indices strengthened. By 08:45, the KOSPI index in Korea rose 1.52%, and the Nikkei 225 and Tokyo Stock Exchange indices both increased by over 1%.

Overnight in the U.S. stock market, driven by the continued AI craze, the three major indices closed slightly higher, with the S&P 500 and Nasdaq reaching new all-time highs again.

It is worth noting that after South Korea’s stock market posted the best gains globally, foreign capital began reducing holdings. According to the latest disclosed data, the BlackRock-owned iShares MSCI South Korea ETF experienced a net outflow of $970 million last week, the largest single-week withdrawal ever. The leveraged Direxion Daily MSCI South Korea Bull 3X ETF also saw outflows of $240 million during the same period.

Meanwhile, bearish sentiment has also increased. According to S3 Partners data, the short interest in the iShares MSCI South Korea ETF rose to 14.81%, the highest level since February 19.

Malcolm Dorson, senior portfolio manager at Global X Management Co., said, “Given the significant appreciation of Korean assets, the concentration of the portfolio has naturally increased, forcing some managers to sell.”

Tom Graff, Chief Investment Officer at Facet, believes that the recent jump in the short interest of the iShares MSCI South Korea ETF is more likely due to some investors hedging individual stock positions through the ETF market rather than a pessimistic outlook on the entire Asian stock market.

Graff stated that, considering the previous sharp rise, some profit-taking is not surprising, and the underlying logic supporting the rally—such as capital expenditure around AI infrastructure—“still has ample tailwinds.”

Goldman Sachs recently released a research report upgrading South Korea’s stock market to an “overweight” rating, raising the 12-month target for the KOSPI index from 8,000 to 9,000 points.

“The sustained high profitability outlook for the memory semiconductor industry indicates that the market has misjudged the durability of earnings,” Goldman analysts wrote. They added that even after the recent surge, the overall valuation of the South Korean stock market is still not expensive, and the allocation remains attractive. Goldman currently expects hardware and semiconductor stocks to drive a 300% profit growth for Korean companies by 2026.

“The Big Short” Sudden Warning

Meanwhile, well-known investor Michael Burry issued a major warning about the U.S. stock market, stating that the “parabolic” rise in U.S. tech stocks is pushing their valuations to unsustainable levels, and the Nasdaq 100 faces a significant decline risk.

In his column, Burry wrote that the current trend in the U.S. stock market closely resembles the peak before the dot-com bubble burst, with particular focus on chip stocks—since late March, the Philadelphia Semiconductor Index has risen nearly 70%.

He pointed out that the actual P/E ratio of the Nasdaq 100 is as high as 43, far exceeding the implied level of about 30 given by Wall Street, due to “Wall Street possibly overestimating the earnings of the fastest-growing, highest-valuation companies by more than 50%.”

Data from Bespoke Investment Group shows that the deviation of the Philadelphia Semiconductor Index from its 200-day moving average has only occurred twice in history—once in July 1995 and again in March 2000, the latter just before the internet bubble burst.

Burry did not recommend investors to short the market. He noted that, given the high cost of put options and the risk of timing errors leading to losses, active shorting is not wise.

Burry stated that he holds a stock portfolio with significant leverage that he considers “undervalued and cheap,” though he did not specify which stocks. He also plans to “reduce” holdings in companies that do not meet his “strict valuation criteria.”

For ordinary investors, Burry’s advice is to take profits from recent gains and reduce overall stock exposure, especially in the tech sector.

In his article, Burry bluntly said that even if the U.S. stock market still has room to rise, investors riding this parabolic rally are essentially betting they can precisely exit at the top or near the top.

He wrote, “History shows us that even if the party lasts another week, a month, three months, or even a year, the eventual outcome will be significantly lower prices. We are entering a rare extreme state, and the consequences will be unavoidable—there’s nowhere to hide.”