Goldman Sachs: For every 1% increase in the weighting of Samsung and SK Hynix, foreign capital may withdraw approximately $2 billion from the Korean market.

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ME News: According to Timothy Moe and John Kwon of Goldman Sachs, as of June 30 (UTC+8), a 1 percentage point increase in the combined weight of Samsung and SK Hynix in the Korea Composite Stock Price Index could lead to foreign investors withdrawing approximately $2 billion from the Korean market, because the U.S. Investment Company Act requires portfolios to meet diversification thresholds. Goldman Sachs also stated that a surge in capital flowing into leveraged ETFs, along with increased options trading and margin retail trading, has created a structural environment in which daily price swings far exceed what corporate fundamentals can support. Since last year, Korea’s asset management growth has primarily come from investment gains rather than new inflows. As valuations rise, institutional investors’ mechanical exposure to market volatility is also increasing—often in connection with hedging strategies. This means that even a moderate market correction could trigger a chain of forced selling. (Source: BlockBeats)
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