"They dumped 16 trillion won in Samsung and SK hynix"—What did foreign investors quietly scoop up? [Money Signal]

[Financial News]   Are foreign investors ruthlessly abandoning Korean semiconductors?
At least judging by the trading flows of Samsung Electronics and SK hynix, South Korea's two leading semiconductor stocks, during September, that conclusion would seem reasonable. But the picture changes completely when viewed through the exchange-traded fund (ETF) market. Foreign investors who aggressively sold the two market leaders were found to have poured more than 100 billion won into ETFs covering the broader domestic semiconductor value chain.
According to the Korea Exchange (KRX) on the 1st, foreign investors recorded net sales of 4.8713 trillion won in Samsung Electronics during September. They sold an even larger 11.5808 trillion won worth of SK hynix. Combined net sales of the two stocks reached a staggering 16.4521 trillion won. The selling continued through the end of the month. On September 30, the last trading day of the month, about 72% of foreigners' total net sales on the KOSPI Composite Index was concentrated in the two stocks—866.7 billion won in Samsung Electronics and 608.5 billion won in SK hynix.
The ETF market, however, showed the opposite trading pattern. According to ETF CHECK, three domestic semiconductor ETFs ranked among the top 10 ETFs for foreign net purchases over the past month, based on the close of regular trading on September 30.

Foreign investors recorded 64.1 billion won in net purchases of the Mirae Asset TIGER Fn Semiconductor TOP 10 ETF, making it the second-highest ETF in terms of foreign net buying.
Funds also flowed into the ACE K-Semiconductor TOP2+ (26.8 billion won) and the HANARO Fn K-Semiconductor ETF (17.5 billion won). Combined, the three products attracted 108.4 billion won. Their returns were also solid: 9.77% for the Mirae Asset TIGER Fn Semiconductor TOP 10 ETF, 9.25% for the ACE K-Semiconductor TOP2+, and 8.81% for the HANARO Fn K-Semiconductor ETF.
What has drawn the attention of market experts is the composition of these ETFs. They do not hold only Samsung Electronics and SK hynix.
They also include a broad range of domestic semiconductor materials, parts and equipment companies, including HANMI Semiconductor, Jusung Engineering, ISU Petasys, WONIK IPS, DB HiTek and LEENO Industrial.
The fact that foreign investors aggressively reduced their holdings of leading memory-chip stocks while buying products that invest across the industry, including equipment and parts, carries significant implications. The move is being interpreted as a strategic shift based on the usual pattern in which large-cap stocks lead during the early stages of a semiconductor recovery, followed by gains in materials, parts and equipment companies as corporate capital spending picks up.

Still, caution is warranted before interpreting the 100 billion won in buying entirely as a “rosy outlook for K-materials, parts and equipment.”
Mechanical trading factors were also involved. In September, semiconductor ETFs were rebalanced following the regular changes to KRX sector indexes. Because of rules capping individual weights in the indexes, the market was effectively set up for large-scale selling of Samsung Electronics and SK hynix, the two large-cap stocks. This is also why the overwhelming 16 trillion won in spot selling cannot be compared directly, on a one-to-one basis, with ETF purchases worth just over 100 billion won.
Even so, the fact that K-semiconductor ETFs repeatedly appeared among the top choices for foreign net buying while the leading semiconductor stocks were hit by historic selling is itself a clear market “signal.”
The real test, ultimately, will come in October. Whether foreigners' indiscriminate selling of Samsung Electronics and SK hynix begins to subside, and whether smart-money inflows into ETFs and materials, parts and equipment companies develop into a structural trend rather than a temporary arbitrage trade, will be key factors determining the success or failure of semiconductor investments in the second half of this year.<Signals appear before money moves. [Money Signal] examines the movement of funds hidden behind the numbers in the market.>[email protected] Jeon Sang-il Reporter