Foreigners dump W3tr in Korean stocks as China's CXMT makes explosive debut

As Chinese memory chipmaker CXMT surged more than 500 percent on its first day of trading Monday, foreign investors net sold nearly 3 trillion won ($2.05 billion) worth of South Korean stocks — prompting market watchers to ask whether global funds were rotating out of Korean semiconductor shares and into China.

The day's focal point was CXMT, which debuted on the Shanghai Stock Exchange's STAR Market on Monday. The state-backed company, China's largest DRAM maker and a direct challenger to Samsung Electronics and SK hynix, raised 57.92 billion yuan ($8.53 billion) through its initial public offering. Its shares opened at 49.50 yuan — 471.6 percent above the IPO price of 8.66 yuan — and climbed more than 500 percent intraday. Its market capitalization surpassed 3.3 trillion yuan, making it the largest stock by market cap on China's A-share market.

Foreign selling was concentrated in semiconductor stocks. On the Kospi on Monday, foreign investors net sold 2.9 trillion won worth of shares, while retail investors and institutions net bought 1.98 trillion won and 862.3 billion won, respectively. Foreign investors net sold 2.24 trillion won in the electrical and electronics sector alone. By individual stock, SK hynix topped the foreign net-selling list at 1.11 trillion won, followed by Samsung Electronics at 841.7 billion won.

The domestic market swung sharply during the session. According to Korea Exchange, the Kospi closed up 64.86 points, or 0.97 percent, at 6,755.75. The index opened 1.73 percent higher but quickly reversed course, falling as low as 6,557.39 intraday before recovering in the afternoon to finish in positive territory.

Top semiconductor stocks by market capitalization also tumbled during the session. Samsung Electronics and SK hynix both opened around 3 percent higher but fell as much as 1.40 percent and 2.96 percent, respectively, during the morning before rebounding in the afternoon. Samsung Electronics ultimately closed up 1.80 percent at 254,000 won, while SK hynix gained 3.24 percent to finish at 1.82 million won.

Expectations for expanded AI investment had grown over the weekend after President Lee Jae-myung's U.S. visit led South Korean and American companies to announce plans for a $950 billion semiconductor cooperation initiative. Even so, the market failed to fully price in the positive news, appearing more sensitive to the possibility of a supply-demand shift tied to the rise of China's memory chip industry.

Securities analysts pointed to the CXMT listing as one of the triggers for Monday's foreign selling. They said volatility in semiconductor stocks was amplified by a combination of profit-taking after sharp first-half gains and the unwinding of leveraged positions.

"Despite the temporary halt to US airstrikes on Iran easing oil-price jitters and the announcement of a large-scale cooperation project with US big tech companies, CXMT-driven volatility intensified," said Kang Jin-hyeok, a researcher at Shinhan Investment. "The supply-demand ripple effects around the opening of Chinese markets appear to have spilled over into the domestic market as well."

Han Ji-young, a researcher at Kiwoom Securities, said the market was caught in a vicious cycle of its own making. "As time goes on, the market itself is conjuring up negative catalysts it wants to sell on," she said. "The CXMT listing, delays in US data center construction and a slowdown in semiconductor profit growth are all previously known factors, but the market is reacting sharply as profit-taking impulses from the first-half rally collide with supply-demand disruptions from leveraged positions."

Similar views emerged in overseas markets. Bloomberg, citing a Samsung Securities trader, reported that some Asian hedge funds were selling Samsung Electronics and SK hynix to fund purchases of CXMT.