Samsung Electronics and SK hynix. Yonhap News
[[B1]] Margin trading in Samsung Electronics (005930.KS) and SK hynix (000660.KS) shares has risen quickly since regulators raised the barriers to single-stock leveraged exchange-traded funds and notes. As curbs limited where investors could place leveraged bets, some of that demand appears to have moved into direct margin loans on the underlying stocks.
[[B2]] Samsung’s average daily new margin loans jumped 52.3%, from 2,487,364 shares last month to 3,788,924 shares over the first 14 days of this month, according to Koscom. SK hynix rose 25.5% over the same period, from 526,625 shares to 660,707 shares.
[[B3]] New margin trading also accounted for a larger share of total volume. In the final days before the rules took effect, the average ratio was 9.12% for Samsung and 10.06% for SK hynix from the 20th to the 30th of last month, but rose to 12.74% and 12.28% respectively this month. Comparing the 31st of last month with the 14th of this month, outstanding margin balances also rose 8.2% for Samsung and 7.6% for SK hynix.
[[B4]] The increase coincided with the timing of the regulators’ new rules. Since the 31st of last month, the financial authorities have required individual investors buying or adding to single-stock leveraged products, at home or abroad, to hold 30 million won ($21,700) in cash as a base deposit. Securities such as stocks, ETFs and bonds are not accepted as the base deposit.
[[B5]] On the 4th of this month, when trades from the effective date settled, Samsung’s new margin loans reached 8.1 million shares, the highest among the 20 trading days analyzed. SK hynix recorded 978,000 shares in new margin loans on the same day.
[[B6]] Trading in single-stock leveraged products, by contrast, shrank sharply. Combined daily turnover across 16 such products fell 93.2%, from 12.4485 trillion won ($9 billion) on the 30th of last month, the day before the rules took effect, to 845.2 billion won ($610 million) on the 7th of this month. This suggests that some speculative demand that left the leveraged products may have shifted into margin loans on the underlying stocks or into index-based leveraged products. The recovery in appeal of Samsung and SK hynix prices after last month’s sharp fall is also cited as a factor behind the rise in margin lending.
[[B7]] The rules tighten further from the 19th. Individuals seeking to newly invest in single-stock leveraged products, at home or abroad, must complete not only the base deposit and prior education but also at least five hours of simulated trading over a minimum of five trading days, with at least one hour per day. Management of the price gap on ETFs and notes will also be strengthened from the same day. If margin trading rises again after the additional rules take effect, it will serve as a second test of whether leveraged investment demand is finding a way around the curbs through other means.
[[B8]] Securities analysts see Samsung and SK hynix reflecting expectations that go beyond a simple earnings recovery, toward stronger competitiveness in the artificial intelligence memory market. For Samsung, rising prices for general-purpose DRAM and NAND, combined with expanded mass production of high-bandwidth memory (HBM) 4 and improved yields on advanced DRAM, are raising hopes of a recovery in its HBM market share.
[[B9]] For SK hynix, a normalization of HBM4 shipments and an expansion of long-term supply agreements (LTAs) are seen as factors supporting high profitability. “Samsung Electronics is recovering both its pricing power in memory and its HBM competitiveness,” said Son In-jun, an analyst at Eugene Investment & Securities. “SK hynix is also entering a phase of greater visibility for earnings growth, based on HBM4 and LTAs.”
[[B10]] Will Samsung Electronics be the winner to seize leadership in the next-generation HBM4?