Goldman Sachs: For every 1% increase in the weight of Samsung and Hynix, foreign capital could withdraw about $2B from the Korean market.

Deep Tide TechFlow News, June 30 - Goldman Sachs' Timothy Moe and John Kwon noted that for every 1 percentage point increase in the combined weight of Samsung and SK Hynix in the Korean stock index, foreign investors may withdraw approximately $2 billion from the Korean market, as the U.S. Investment Company Act requires portfolios to meet diversification thresholds. Goldman Sachs also stated that a large influx of capital into leveraged ETFs, along with increased options trading and margin retail trading, has created a structural environment where daily price fluctuations far exceed what corporate fundamentals can support.

The growth in asset management scale in South Korea since last year has mainly come from investment returns rather than new capital inflows. As valuations rise, institutional investors' mechanical exposure to market volatility is also increasing—this is often associated with hedging strategies. This means that even a moderate market correction could trigger a chain of forced selling. (Jin Shi)