Foreign Investors Buy $1.5 Billion of Samsung, SK Hynix in Two-Day Buying Spree

Foreign investors have halted their recent selloff in South Korean stocks and turned net buyers, purchasing more than 2 trillion won ($1.44 billion) worth of shares in chip leaders Samsung Electronics Co. and SK Hynix Inc. over the past two trading days. The buying is being viewed as bargain hunting after the stocks slid into oversold territory despite little change in corporate fundamentals.

According to the Korea Exchange, foreign investors were net buyers of 3.19 trillion won ($2.30 billion) of shares on the Kospi over the past two trading days. They had been net sellers from June 19 through July 7, except for net purchases of 343.7 billion won ($248 million) on July 8 and 134.3 billion won ($97 million) on July 9. On July 15 alone, foreigners bought more than 2 trillion won ($1.44 billion) of local shares, up from 956.5 billion won ($690 million) a day earlier. It was the first time in 23 trading sessions that foreign investors had bought more than 2 trillion won of domestic stocks since June 12.

SK Hynix was the top foreign buying target over the two-day period, attracting net purchases of 1.9322 trillion won ($1.39 billion). SK Square Co., which owns a 20.5% stake in SK Hynix, ranked second with 253.1 billion won ($183 million), followed by Samsung Electronics with 219.3 billion won ($158 million).

The two chipmakers have come under heavy pressure this month. As of the previous session, SK Hynix had fallen to 191,300 won and Samsung Electronics to 263,000 won. That left the stocks down 35.96% and 29.77%, respectively, from their intraday highs in June. Concerns about a peak in the semiconductor cycle and supply-demand distortions tied to single-stock leveraged products helped trigger the selloff.

Both stocks rebounded on July 15 as foreign funds returned, with SK Hynix jumping 8.83% and Samsung Electronics rising 6.27%. The pullback has made valuations more attractive even as company fundamentals and industry conditions remain solid. Lee Hwa-jin, deputy director at Meritz Securities' Gwanghwamun Premier Center, said the buying appeared to reflect genuine demand after foreign investors had sharply reduced their holdings of Samsung Electronics and SK Hynix through portfolio rebalancing.

Chae Min-sook, an analyst at Korea Investment & Securities, said recent share-price volatility reflected macroeconomic uncertainty and concerns about the durability of AI infrastructure spending. Structural supply constraints driven by high-bandwidth memory, or HBM, expansion and the structure of long-term supply agreements should help the memory industry sustain high profitability for an extended period. The sector's key drivers -- expanding AI infrastructure investment and limited supply -- remain unchanged, she added.

For SK Hynix in particular, a widening premium on its American depositary receipts may lead to further foreign buying of the locally listed shares. SK Hynix ADRs surged more than 27% overnight, pushing their premium over the Seoul-listed stock above 50%. Based on the ADR price and the previous day's close in Seoul, the premium now stands at 51%. That is far above the 3% level set when the ADR was listed.

The widening premium could support net buying of the local shares, rather than prompting investors to sell the underlying stock and switch into ADRs, contrary to concerns in some corners of the market. Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, is often cited as a precedent. Kim Jae-seung, an analyst at Hyundai Motor Securities, said foreign investors tend to buy TSMC's locally listed shares when its ADR premium widens. When the ADR trades at a premium of more than 25% to the local stock, global investors with access to both markets may opt for the cheaper local shares instead.

In Taiwan, investors generally view TSMC's local shares as attractive when the ADR premium rises above 20%, Kim said. SK Hynix's ADR listing is better viewed not as a structural trigger for foreign outflows from the local stock, but as an opportunity to create a new price-discovery channel between US and South Korean markets through the ADR premium.

Ko Jeong-sam, Hankyung.com reporter, jsk@hankyung.com