South Korean Funds Sold Chinese Stocks but Bought CXMT, Attracting Hundreds of Billions of Won

[Financial News] South Korean funds invested hundreds of billions of won in ChangXin Memory Technologies (CXMT), China’s largest DRAM maker, last month. Although they were net sellers of Chinese stocks overall, more than six times the amount invested in the second-largest net purchase flowed into CXMT. Expectations that CXMT’s growth will continue, driven by rapid earnings growth and the mass production of next-generation products, led to the net purchases.
According to the Korea Securities Depository on the 7th, South Korean funds’ net purchase settlement amount for CXMT in August was $25,354,997, or approximately 35.5 billion won, the largest among Chinese stocks. CXMT far outpaced Weichai Power, which ranked second at $4,036,798, and Midea Group, which ranked third at $2,328,785.
South Korean funds have continued selling Chinese stocks this year. In August, their purchase settlement amount for Chinese stocks was $77.1 million, while the sale settlement amount was $83.31 million, resulting in net sales of $6.21 million. They were net sellers every month from January through August, with cumulative net sales reaching $171.23 million. Even as overall investor enthusiasm for Chinese stocks remained subdued, funds were selectively concentrated in CXMT.
The South Korean funds flowing into CXMT are believed to have been indirect investments centered on ETFs and public funds. This is because CXMT is difficult for individual South Korean investors to purchase directly through the usual overseas stock trading process.
Asset managers are also responding to investment demand by adding CXMT to their ETFs. Among the ETFs, KODEX China AI Semiconductor TOP10 and TIGER China Semiconductor FACTSET hold CXMT.
Public funds are another major channel for South Korean funds flowing into CXMT. According to reporting in the asset management industry, Mirae Asset China Mainland Securities Investment Trust No. 1, Shinhan China Mainland Core Active Securities Investment Trust, and Shinhan China AI Semiconductor Securities Investment Trust were confirmed to hold CXMT. The Korea Investment Navigator China Mainland Fund also holds Qualified Foreign Institutional Investor (QFII) status, allowing it to invest in CXMT, which is listed in mainland China.
The influx of funds into CXMT was driven in part by the rapid earnings growth confirmed shortly after its listing. CXMT’s revenue in the second quarter of this year rose 95.9% from the previous quarter to 99.51 billion yuan, approximately 20 trillion won. Operating profit increased 130.6% to 81.71 billion yuan, or approximately 16.4 trillion won.
The mass production of next-generation products and an expanding market share are also enhancing CXMT’s investment appeal. CXMT began mass-producing LPDDR6 at the end of last month, becoming the first company in the world to do so. Its share of the global DRAM market rose from 4% in the first quarter of last year to 10% in the second quarter of this year. Mirae Asset Securities raised its forecasts for this year’s revenue and operating profit by 42.9% and 75.5%, respectively, and increased its target price from 80 yuan to 90 yuan.
However, concerns have also emerged over valuation and an overheated initial public offering (IPO) market for Chinese technology companies, as the stock price has surged since its listing. Kim Ye-seul, a researcher at IBK Securities, said, "A large amount of money is flowing into China’s IPO market, so interest in technology companies is likely to continue. However, some are also raising concerns about an IPO bubble."
[email protected] Bae Han-geul Reporter