Hong Kong memory ETFs plunge 16% as global chip selloff deepens

Hong Kong memory stocks fell on Aug. 3, with the Southern 2x leveraged SK Hynix ETF down 16 percent as the global chip selloff deepened.

Morgan Stanley called the recent selloff "largely technical," describing a "leverage washout" as leveraged ETFs, hedge fund positions and retail margin unwind together, while upgrading Korean stocks to Overweight and forecasting the KOSPI could rise 36 percent from Friday's close.

The Southern 2x leveraged Samsung Electronics ETF fell more than 13 percent, while A-share memory names GigaDevice (兆易创新) and Montage Technology (澜起科技) each dropped 8 percent. The decline tracked a sharp reversal in Korean chipmakers, with the KOSPI falling 5 percent Monday, Samsung Electronics sliding 8 percent and SK Hynix's Korean-listed shares dropping 4 percent.

The selloff extends a brutal stretch for the memory complex, which has seen the KOSPI fall roughly 33 percent from its June peak through late July, wiping out about $2 trillion in market value as foreign investors pulled roughly $13 billion from Korean equities in July alone. Samsung Electronics and SK Hynix together account for more than half of the KOSPI's market value, tying the fate of the entire index to the two chipmakers.

The Hong Kong moves mirrored a broader regional retreat in memory and storage names. U.S. peers also cooled Monday, with Micron Technology down 5 percent to $782, SanDisk off 1.5 percent to $1,197, Western Digital down 6 percent to $511 and Seagate Technology lower by 6 percent to $801. The Roundhill Memory ETF fell 3 percent to $48.81.

The pullback follows a torrid run that left the group sharply higher for the year. Micron stock is up 188 percent year to date and SanDisk shares have gained 412 percent, so Monday's move sits inside one of the year's most powerful sector rallies.

SK Hynix reported disappointing earnings as memory chip prices softened, a result that shook confidence in the memory cycle and added margin pressure to an already jittery market. Chinese competitor CXMT is also increasing DRAM production, steadily building capacity and pressuring pricing for Korean incumbents.

Part of what made the selloff so severe was leverage. Leveraged single-stock instruments, widely used by Korean individual investors, triggered successive declines when margin requirements activated forced liquidations, pushing downside moves well beyond what underlying fundamentals would justify.

Despite the retreat, some global funds treated the drawdown as an entry point. UBS initiated coverage of SK Hynix's U.S.-listed ADR at Buy with a $204 price target, calling the pullback an attractive entry point. SK Group Chairman Chey Tae-won also made his first-ever personal purchase of SK Hynix shares, a bullish insider signal that landed just as the tape rolled over.

The fundamentals behind the multi-year AI memory cycle appear intact for now, with HBM, DDR5, NAND and mass-capacity HDD demand still tied to hyperscaler capital expenditure plans. Monday's move looks like a cool-down in positioning after enormous gains rather than a change in the underlying setup.

This article is for informational purposes only and does not constitute investment advice.