Foreign investors who have been steadily selling Samsung Electronics (005930.KS) and SK hynix (000660.KS) shares have shown a "two-track" strategy of repeatedly buying and selling single-stock leverage products, data showed.
The pattern is interpreted as foreign investors adjusting their portfolio weightings by taking profits on individual stocks that surged in the short term, while actively trading leverage products to pursue short-term gains.
According to the Korea Exchange on Tuesday, foreign investors net-sold 124.6 billion won worth of seven SK hynix single-stock leverage products from last month's 27th, when the products were first listed, through the 12th.
The daily flow, however, was not simply one-way selling. Of the 12 total trading days, foreign investors recorded net selling on seven days and net buying on five days. The trading amounted to a "ping-pong" pattern of selling for several days before buying again.
A similar trend appeared in the seven Samsung Electronics single-stock leverage products. Foreign investors net-sold 17.5 billion won worth of these products over the same period. As with SK hynix, they were net sellers on seven of the 12 trading days and net buyers on five.
In the case of Samsung Electronics single-stock leverage, foreign investors' cumulative purchases exceeded sales in six of the products, excluding the TIGER product.
By contrast, they maintained strong selling pressure on the underlying shares. Foreign investors net-sold Samsung Electronics for 10 consecutive trading days from last month's 27th through the 10th, and SK hynix for 23 consecutive trading days from last month's 7th through the 10th. SK hynix only turned to net buying on the 11th.
From last month's 27th through the 12th, foreign investors' cumulative net selling reached 12.6098 trillion won for Samsung Electronics and 7.8761 trillion won for SK hynix, exceeding a combined 20 trillion won for the two stocks.
Foreign ownership also declined. Samsung Electronics' foreign ownership stood at 47.58% on the 12th, while SK hynix's was 51.05% on the 11th, both falling to their lowest levels this year.
Analysts view the moves as foreign investors taking profits and adjusting portfolio weightings, given that large-cap chip stocks have surged this year. With expectations for the semiconductor industry still intact, however, the strategy is interpreted as reducing underlying shares while using single-stock leverage to seek profit opportunities.
Lim Eun-hye, head of the ETP strategy team at Samsung Securities (016360.KS), said, "Foreign investors account for 35 to 45 percent of trading volume in single-stock leverage products," adding that they "conducted high-frequency spot-futures-exchange-traded fund (ETF) arbitrage trading."
Lim particularly explained, "Single-stock leverage products have advantages in trading ease, bid-ask spreads and costs," adding, "Accordingly, unlike their aggressive selling of spot stocks, foreign investors frequently alternated between long (buying) and short (selling) positions on single-stock leverage products."
