Goldman Sachs: A 1% Increase in Samsung and SK Hynix Weighting Could Trigger Foreign Capital Outflow of Around $2 Billion from the Korean Market

BlockBeats News, June 30th, Goldman Sachs' Timothy Moe and John Kwon pointed out that for every 1 percentage point increase in the combined weight of Samsung and SK Hynix in the Korean stock index, foreign investors may withdraw around $20 billion from the Korean market, as the U.S. Investment Company Act requires portfolios to meet diversification thresholds.

Goldman Sachs also stated that a large influx of funds into leveraged ETFs, coupled with the increase in options trading and margin retail trading, has created a structural environment where daily price fluctuations far exceed what the underlying fundamentals of companies can support. The growth in Korea's asset management size since last year has mainly come from investment gains rather than new funds.

As valuations rise, institutional investors' mechanical exposure to market volatility is also increasing—often associated with hedging strategies. This means that even a moderate market pullback could trigger a series of forced sell-offs.