Goldman Sachs: A 1% Increase in Samsung and SK Hynix Weight Could Lead to $2 Billion Foreign Capital Withdrawal from Korea

On June 30, Goldman Sachs' Timothy Moe and John Kwon pointed out that a 1 percentage point increase in the combined weight of Samsung and SK Hynix in the Korean stock index could lead to approximately $2 billion in foreign investor withdrawals from the Korean market, as the U.S. Investment Company Act requires portfolios to meet diversification thresholds. Goldman Sachs also noted that a significant influx of funds into leveraged ETFs, along with increased options trading and retail margin trading, has created a structural environment where daily price fluctuations far exceed what corporate fundamentals can support. The growth in Korea's asset management scale since last year has primarily been driven by investment returns rather than new capital. As valuations rise, institutional investors' mechanical exposure to market volatility is also increasing—often related to hedging strategies. This means that even a mild market correction could trigger a series of forced sell-offs.