Analysts react to rout in South Korea stocks

Analysts react to rout in South Korea stocks - EWY News | Rallies

Analysts say the selloff is being driven by leverage and sentiment

Peter Kim, senior managing director, KB Securities, Seoul:

"The selloff is not driven by fundamental deterioration. This is a liquidity and sentiment-driven event, fuelled by the forced unwinding of single-stock leveraged ETFs across Korea, U.S., HK and UK, making the move sharper and more extreme than warranted by fundamentals.

"Sentiment remains fragile and retail-dominated, with fund flows and retail positioning currently the key market driver rather than earnings or fundamentals. The scale of leverage built up means the flush out will not complete within one or two weeks, and the price correction itself is generating more negative headlines, creating a self-reinforcing cycle that continues to overshadow any positives."

Gina Kim, portfolio manager for emerging market equities, Nordea Asset Management, Singapore:

"Given that the fundamental thesis remains intact, there does appear to be an irrational, panic-like element to the current selling, which has been concentrated in AI-related tech names.

"Some of this selling can be rationalised - de-risking ahead of the summer holidays, margin calls and similar flows - alongside recent newsflow on the sustainability of AI capex given rising debt levels and lower FCF at the CSPs, Chinese AI breakthroughs, and advances in chip manufacturing technology."

"We have trimmed some of our larger tech stock exposure due to single stock limits rather than for fundamental reasons."

Gary Tan, portfolio manager at Allspring Global Investments, Singapore:

"SK Hynix delivered strong results, but in today’s AI market, strong is no longer enough. Investors were looking for additional catalysts, particularly around long-term agreements and shareholder returns, to support a memory sector that has become the epicentre of the AI trade. Without those signals, we expect volatility in AI-linked equities across Asia to persist as leveraged positions unwind and the market resets expectations."

South Korea stocks fall for a second straight session

More views point to crowded positioning and technical selling

Analysts say the selloff is being driven by leverage and sentiment

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