SK Hynix stocks experienced a maximum drawdown of 43% from peak during the recent week, matching decline levels last seen in 2022 when the company reported losses. SK Group Chairman Choi Tae-won stated at the recent Jeju Forum that memory prices should fall, calling current prices abnormal. DRAM spot prices rose 2% over the past week and 7% from a month prior, while DRAM ETFs attracted approximately $4.5 billion in net inflows during July. The stock decline occurred despite improving fundamentals, with analysts attributing the drop to foreign investor portfolio rebalancing and leverage ETF-driven selling pressure rather than deteriorating business conditions.
SK Hynix Stocks Fall 43% Despite Rising DRAM Prices
According to the securities industry on the 20th, SK Hynix's maximum drawdown based on intraday lows during the recent week reached 43% from peak. This decline matched levels from 2022 when memory industry conditions deteriorated and the company's net profit turned to losses. DRAM spot prices averaged a 2% increase over the past week and rose 7% compared to a month prior. DRAM-related ETFs received net inflows of approximately $4.5 billion ($6.7 trillion won) in July, with $2.4 billion (approximately ₩3.6 trillion) flowing in during the most recent 5 trading days alone.
Lee Jae-man, Head of Global Investment Analysis at Hana Securities, characterized the stock adjustment as an oversold phase where share prices fell more than fundamentals warranted. He stated that if Alphabet and Meta's earnings exceed market expectations or Microsoft's capital expenditures surpass forecasts, global semiconductor stocks would likely experience positive impact. Lee emphasized the importance of confirming AI investment continuation during the current Big Tech earnings season. Historical data showed Samsung Electronics and SK Hynix averaged 11% and 17% gains respectively over the following month when Alphabet recorded revenue-based earnings surprises. Conversely, when results fell short of expectations, average returns were 2% and -3% respectively.
KOSPI200 Semiconductor Weight Drops from 61.1% to 55.5%
BNK Investment & Securities identified global institutional investor portfolio rebalancing as the background for the recent semiconductor weakness. The firm explained that as semiconductor weightings in global markets reached historically high levels due to AI investment fervor, some funds shifted to other sectors including financials, with Korea's stock market experiencing relatively larger impact due to its high semiconductor concentration.
The semiconductor market capitalization weight within KOSPI200 rose from 43.0% in April to 61.1% in June before declining to 55.5% recently. Kim Seong-no, researcher at BNK Investment & Securities, stated that viewing the situation as an adjustment process for elevated weightings rather than deteriorating semiconductor conditions would be more accurate. He added that supply-demand conditions could stabilize only after rebalancing concludes.
Leverage ETFs Record ₩29 Trillion Trading Volume from 13th to 16th
KOSPI experienced repeated rollercoaster sessions this month, surging approximately 6% in a single day followed by 5-9% plunges on the next trading day. Investment sentiment and supply-demand changes dominated market movements over corporate earnings. Single-stock leverage ETFs for Samsung Electronics and SK Hynix were identified as factors amplifying market shocks. From the 13th to 16th, SK Hynix single-stock leverage ETFs uniformly plunged over 30%. Samsung Electronics single-stock leverage ETFs also declined more than 20%.
During the same period, KODEX SK Hynix Single Stock Leverage and TIGER SK Hynix Single Stock Leverage recorded trading volumes of ₩20.5 trillion and ₩8.5 trillion respectively. Kim Yong-beom, Presidential Policy Office Director, appeared on a broadcast on the 19th and stated that abolishing single-stock leverage products itself could deliver tremendous shock to the market. He added that authorities, asset management companies, and securities firms should discuss further how to minimize market impact.
Analysts Cite Big Tech AI Investment Continuation as Recovery Catalyst
A securities industry official stated that the core issue of the current adjustment was share prices plunging ahead of business condition deterioration. The official noted that fundamentals including DRAM price increases and AI investment expansion remain solid, but the gap between stock prices and earnings would gradually narrow only after confirmation of US Big Tech's continued AI investment and mitigation of foreign rebalancing and leverage product-driven trading shocks.
FAQ
What caused SK Hynix stocks to fall 43% from peak?
SK Hynix stocks fell 43% from peak during the recent week due to foreign investor portfolio rebalancing and leverage ETF-driven selling pressure. The KOSPI200 semiconductor weight rose from 43.0% in April to 61.1% in June before declining to 55.5% recently as global institutional investors adjusted elevated semiconductor allocations. Single-stock leverage ETFs for SK Hynix plunged over 30% from the 13th to 16th, with trading volumes reaching ₩20.5 trillion and ₩8.5 trillion for two major products during that period.
What did Choi Tae-won say about memory prices at the Jeju Forum?
SK Group Chairman Choi Tae-won stated at the recent Jeju Forum that memory prices should fall, calling current prices abnormal. He suggested that excessively high memory prices could burden AI investment expansion. This statement came as DRAM spot prices rose 2% over the past week and 7% compared to a month prior, while DRAM ETFs attracted approximately $4.5 billion in net inflows during July.
How did analysts assess the relationship between SK Hynix fundamentals and stock performance?
Lee Jae-man of Hana Securities characterized the stock adjustment as an oversold phase where share prices fell more than fundamentals warranted. A securities industry official stated that fundamentals including DRAM price increases and AI investment expansion remain solid. Historical data showed SK Hynix averaged 17% gains over the following month when Alphabet recorded revenue-based earnings surprises, compared to -3% average returns when results fell short of expectations.
