Global banks have recently significantly reduced the swap transaction costs for foreign investors betting on SK Hynix's stock. According to Bloomberg on the 19th, Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase are now offering rates approximately 150 to 300 basis points (1bp = 0.01 percentage points) above the Secured Overnight Financing Rate (SOFR) for clients looking to invest in SK Hynix's domestic shares through swaps.
This marks a substantial decrease compared to mid-June, when some banks demanded rates over 1000 basis points higher than SOFR for new swap transactions or contract renewals. Since May, SOFR has fluctuated between 3.50% and 3.69%.
Swaps are derivatives that allow investors to gain returns based on stock price fluctuations without actually holding the shares. Due to capital regulations, taxes, anonymity, and leverage utilization, global funds often prefer swaps over direct stock purchases in markets like South Korea, China, and India.
Previously, the surge in SK Hynix's stock price—nearly an 11-fold increase over the year leading up to June 22—due to the AI investment boom had driven up demand for leveraged investments. In response, banks expressed concern over excessive concentration in SK Hynix transactions, leading them to limit new swap deals or decline requests from certain clients.
However, the situation has changed recently. Growing investor anxiety regarding AI-related stocks has led to a broader sell-off in global markets. Some banks that had previously declined transactions are now reportedly seeking to attract new clients again.
According to data compiled by Bloomberg, the KOSPI index fell 22% last month, marking its largest monthly decline since October 2008. SK Hynix and Samsung Electronics together account for about half of the KOSPI's total market capitalization.
The adjustment in tech stocks, coupled with SK Hynix's issuance of American Depositary Receipts (ADRs) last month, has alleviated the concentration risk that banks were concerned about. The issuance provided investors with alternative investment options beyond domestic stock swaps, and the decline in AI stocks has led to a reduction in existing leveraged positions.
In a recent survey conducted by Bank of America among fund managers in Asia, excluding Japan, a trend emerged where Asian investors are reducing their exposure to tech and cyclical stocks in favor of defensive stocks.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.