Key points
- Korean investors bought $85.61 million of a US memory ETF in one week, their second-biggest overseas purchase after Alphabet.
- Almost half the fund is Samsung Electronics and SK Hynix (SKHY), the two stocks they can already buy at home.
- Its fastest-growing Chinese holding is CXMT, the memory maker pressing on Samsung and SK Hynix prices, now 4.68%.
Korea Securities Depository data released August 22 showed that Korean buyers of US equities purchased $85.61 million of the Roundhill Memory ETF (DRAM) from August 14 through August 20. Alphabet (GOOGL) narrowly took first place with $89.12 million in purchases.
DRAM is the first US fund that is made up of only memory chip companies. It opened on April 2 this year, and we've followed what it owns since June. According to the fund's latest published holdings, Samsung Electronics carries 26.19%, and SK Hynix weighs 21.61%. Micron (MU) sits between them at 24.87%.
That means close to half of every dollar invested in DRAM goes toward two companies Korean investors can purchase directly in Seoul, using won and trading in their own time zone. Through DRAM, they instead pay a 0.65% annual fee, buy in dollars, and assume the accompanying currency exposure.
The portfolio does not hold every position in the same form. Some of the exposure comes from shares, and some comes through bank contracts designed to deliver the same return. That is why Samsung and SK Hynix each appear twice in the fund's holdings file.
This overseas buying came after a sharp two-week rally in Korea. From August 10 to August 21, SK Hynix gained 21.66%, and Samsung climbed 21.86%. Both rose by more than twice the Kospi's 10.45% advance. Some of the money that moved toward New York earlier in the summer is now buying into the same recovery, only from across the Pacific.
The fund's fastest-growing Chinese holding is CXMT. China's largest maker of DRAM now accounts for 4.68% of the fund and is worth about $1.29 billion. When we wrote about that position on August 2 it was $627 million, so it has doubled in three weeks. It isn't the fund's first Chinese name either. GigaDevice came in back in June and is still there at 1.12%. CXMT is expanding output of ordinary memory, and it's the company Korean chipmakers name most often when they talk about prices falling, so a Korean saver buying this fund is also buying a small piece of that.
Noh Geun-chang (노근창), a researcher at Hyundai Motor Securities (현대차증권), doesn't think that piece will get large quickly.
"With the large capital spending by TSMC and the three global memory makers, CXMT is expected to have real difficulty getting foreign equipment."
He continued that US restrictions on selling equipment to China could get tighter, and that the chance of Apple and other big buyers putting Chinese memory into their products is very small.
At home, the cash keeps building up too. Investor deposits held at brokerages, the money waiting to be put into stocks, were 105.35 trillion won ($76.0 billion) on August 20, back up from 97.93 trillion won ($70.6 billion) on August 11. Borrowed money is rising with it. Margin loan balances reached 31.89 trillion won ($23.0 billion) on August 20, up 3.1% in a week and up from 27.4 trillion won ($19.8 billion) at the start of the month.
Meanwhile, the fund itself has grown about as fast as anything in this market. It passed $1 billion in assets 18 days after it opened, and it now holds $27.91 billion. Korean investors have been in it almost since the first day. In its first month, through May 1, they bought $225.57 million (332 billion won) of it, close to 10% of everything that went into the fund.
Sources
- 연합뉴스, 서학개미 '삼전닉스' 라운드힐 ETF 한주간 1천억 샀다, on the weekly purchase totals, deposits and margin balances
- 서울경제, 삼전 줄인 美 DRAM ETF 中 창신메모리 담았다, on the CXMT holding and the Hyundai Motor Securities comment
- 서울경제, 한달새 45% 뛴 美 DRAM ETF 서학개미가 10% 샀다, on the first month of Korean buying and the share of total inflows
- Our earlier coverage of the fund's CXMT position, its first Chinese holding, how the three memory makers compare with the Mag 7, where Korean retail money went in July and the payout wave behind the chip rally
Figures are converted at about 1,386.5 won to the US dollar. The analyst comment is translated from Korean. Source titles are in the original Korean. This is general market commentary and not investment advice.
