The “AI Prophet” collapsed into an official warning case! Bank of Korea sounds “foreign leverage” alert at a time when storage and the Korean stock market are gaining momentum

The Zhitong Finance App learned that just as the investment logic of the Korean stock market is being actively promoted by the resurgence of the memory chip industry chain and the re-influx of capital from foreign institutions, the Bank of Korea warned that overseas hedge funds, leveraged ETFs, and hedging transactions carried out by international banks and asset management around full income swaps are expanding the impact of foreign capital on the Korean spot market.

According to information, a statement released by the Bank of Korea on Thursday shows that the central bank's core concern is that when global capital investment in the Korean stock market is increasingly concentrated in minority stocks such as Samsung Electronics and SK Hynix, leveraged positions and centralized liquidation may amplify the rise and fall of the entire index. Therefore, according to the central bank, strong profit growth at the fundamental level of the memory chip industry and sharp long-term fluctuations in the stock market may coexist for a period of time.

The South Korean stock market has clearly rebounded from its July low and has once again reached what is commonly referred to as the technical bull market standard of “rising at least 20% from a low point.” On September 7, the Korean stock market benchmark index, the KOSPI index, which has the title of “AI computing power weather vane,” rose sharply by 4.6%, and net foreign purchases of Korean stocks reached 129.1 billion won, in line with the simultaneous strengthening of US and South Korean storage stocks. Among them, Samsung Electronics and SK Hynix rose 5.7% and 8.1% respectively; on September 8 and September 9, the index rose further, once to 7129.34 points, with a cumulative rebound of about 27.5% from the low level of about 5593 points on July 30. Samsung and Hynix at the time were 2.59% and 3.98%, respectively. The two storage giants continued to lead the index's recovery. The technical bull market meant a significant recovery from a low level, but it didn't mean that the Korean stock market had recovered all of its recent declines — in fact, it is still a long way from the all-time high of 9385, which was set in June.

The blowout expansion in AI computing power demand has brought about a wave of memory chips

Bernstein, one of Wall Street's largest investment banks, recently released a research report saying that although the semiconductor industry is showing a seasonal decline as expected by the market, demand for semiconductors related to AI computing power infrastructure construction — in particular, next-generation HBM storage systems closely linked to AI infrastructure and data center server-level DRAM/NAND memory chips is still extremely strong.

Bernstein said that July was a low season for traditional semiconductor sales but still increased by 131.4% year on year. In July, global memory chip sales surged 451.7% year on year. Excluding storage, global semiconductor industry sales increased by about 35% year on year.

Further, the change is that storage is becoming a major source of semiconductor revenue growth. According to the Bernstein report, global semiconductor sales for the first seven months of this year were about 861 billion US dollars, up from 408 billion US dollars in the same period last year, an increase of about 111% over the previous year; storage contributed about 351 billion US dollars in new sales. Among them, the report's contribution to changes in storage prices and product portfolios is approximately US$306 billion, which is equivalent to about 68% of the new sales of the entire industry.

According to Goldman Sachs, another Wall Street financial giant, memory chips are beginning to break out of summer consolidation technical indicators, and there is plenty of room for reconfiguration left after deleveraging. Goldman Sachs said that after experiencing the AI deleveraging storm in July and a massive sell-off under extreme congestion in bullish positions, and after the global stock market was in a state of sideways trading and cabinet shock for most of this summer, the beginning of memory chip stocks and storage product line investment targets related to the AI data center construction frenzy has significantly broken through the recent weak downward trend and moved towards a new round of upward bullish market trajectory.

Goldman Sachs statistics show that the total leverage and net leverage of US fundamental long and short hedge funds were at the 27th and 4th percentile of the past year, respectively, and the semiconductor implied volatility index fell from about 65 to 36 in July. These all mean that the fund's overall risk exposure is still low, and the market's pricing for sharp fluctuations has settled; Goldman Sachs also said that important memory chip stocks such as Micron and SanDisk continued to break through the consolidation range, providing a technical signal for capital rearrangement.

The international bank UBS Group (UBS) provided another basis to support the rebound. Senior UBS analyst Timothy Acuri predicted in a September 8 report that the overall average sales price of memory chips in the third quarter of this year will rise more than 20% month-on-month from the record high base in the second quarter, and it is expected that the supply of DRAM and NAND is seriously inadequate to the expansion of AI computing power leading to strong storage demand until at least 2027.

Improvements in positions and technology, combined with the blowout expansion of AI computing power demand in the context of enterprises speeding up the deployment of AI agents and proxy AI inference tools, have led to a continuous surge in demand for memory chips, and jointly support the logic of memory chip stocks regaining capital flow support.

The Bank of Korea warns of the risk of derivatives linked to Korean chipmakers, and cross-border leverage may become a market amplifier

Needless to say, memory chip stocks are forming a new bullish outline that “price increases support profits and low positions provide strong room to fill positions”; however, the Bank of Korea warned that high-leverage and high-frequency hedging transactions initiated overseas may also cause this round of rebound to once again experience a sharp retracement.

The Bank of Korea called for increased monitoring of foreign derivatives linked to Korean chipmakers, warning that the rapid growth of such products may continue and amplify domestic stock market fluctuations over a long period of time, and listed leveraged bets from hedge fund Situational Awareness as one of the driving factors for recent market fluctuations.

The Bank of Korea said in its semi-annual “Monetary Policy Report” submitted to the National Assembly on Thursday that the Korean market is highly concentrated on storage semiconductor stocks. Coupled with foreign investors adjusting their portfolios on the basis of highly leveraged positions, and the accumulation and removal of domestic market leverage, they have jointly contributed to unprecedented fluctuations in the Korea Composite Stock Price Index from January to July.

According to the report, overseas hedge funds have also increased market volatility by establishing large-scale leveraged positions in Korean chip stocks and canceling these positions during the intense sell-off in July. The Bank of Korea takes the Situational Awareness Fund, which is headquartered in the US and focuses on artificial intelligence investment — a hedge fund personally managed by Leopold Aschenbrenner, the youngest hedge fund with the title of “AI investment pioneer.” The Bank of Korea quoted foreign media reports that the popular hedge fund used up to 4 times the leverage when establishing and releasing positions in global memory chip companies. It was also after the fall of the AI Prophet that some Wall Street analysts believed that the global AI technology stock deleveraging process had basically come to an end as bears made up, the buying power of institutions and retail investors on dips, and the continued strong expansion of AI computing power fundamentals.

In July, due to a sharp sell-off of semiconductor stocks closely linked to AI computing power infrastructure, the Korean stock market and the US Philadelphia Semiconductor Index fell directly into a bear market. Coupled with the collapse of highly leveraged AI bets, Situational Awareness, a hedge fund led and managed by Leopold Aschenbrenner, recorded a record loss of 67% in July, forcing the fund to sell most of its open market positions to hedge fund giant Citadel, which is headed by Wall Street billionaire Ken Griffin, and completely dismissed All levers.

When the Bank of Korea issued the warning statement mentioned above, demand for overseas highly leveraged ETF products linked to South Korea's memory chip manufacturing giants and highly concentrated overseas ETF investment demand from SK Hynix and Samsung was growing rapidly. BlackRock is a South Korean stock market ETF that is traded on the US stock market. About a quarter of its investment portfolio is allocated to SK Hynix. The fund attracted a record inflow of US$2.8 billion in capital during the week of July. The Bank of Korea said that the growth of such products is creating more channels for foreign capital flows to influence the domestic market in South Korea.

The Bank of Korea said that the market value of leveraged ETFs listed and traded in Hong Kong, China and actively tracks Samsung Electronics and SK Hynix surged more than 20 times in the first half of the year. The Bank of Korea added that international hedge fund institutions and international asset management giants are trading Korean stock spots, futures, and options to hedge high-leverage full-return swap transactions with ETF management agencies, which seems to have amplified fluctuations in domestic stock prices in South Korea.

Although the Bank of Korea did not cite specific cases, an abnormal transaction involving SK Hynix shares in July triggered the forced liquidation of a position of nearly 60 million dollars in an offshore cryptocurrency market, highlighting the rising cross-market risk caused by leveraged products linked to Korean chipmakers.