Goldman Sachs: A 1% Increase in Samsung and SK Hynix Weight Could Lead to $2 Billion Foreign Capital Outflow from the Korean Market

Deep Tide TechFlow reports that on June 30, Goldman Sachs analysts Timothy Moe and John Kwon pointed out that every 1% increase in the combined weight of Samsung and SK Hynix in the Korean stock index could potentially result in foreign investors withdrawing approximately $2 billion from the Korean market. This is due to the U.S. Investment Company Act requiring portfolios to meet diversification thresholds. Goldman Sachs also noted that the influx of substantial funds into leveraged ETFs, coupled with the rise in options trading and margin retail transactions, has created a structural environment where daily price fluctuations far exceed the range supported by corporate fundamentals. Since last year, the growth in Korea's asset management scale has primarily been driven by investment returns rather than new capital inflows. As valuations climb, institutional investors' mechanical exposure to market volatility is also increasing—often tied to hedging strategies. This implies that even a moderate market correction could trigger a chain reaction of forced selling. (Jin10)