Global banks curb hedge fund bets on SK Hynix, Samsung after wild moves

Published Fri, Jun 12, 2026 · 03:30 PM

[HONG KONG] Global banks are curbing hedge funds’ leveraged bets on Asia’s top chipmakers including SK Hynix and Samsung Electronics after a blistering rally this year raised concerns of a potential pullback, according to people familiar with the matter.

Brokers including Citigroup, JPMorgan Chase and Goldman Sachs Group have raised the financing cost for hedge funds to take bullish wagers on SK Hynix and Samsung Electronics shares via swaps, said the people.

Banks have also tightened the size of new trades and which firms they will give them to, the people said, asking not to be identified while discussing private information. They have taken similar steps for Taiwan Semiconductor Manufacturing, the people added.

Morgan Stanley is turning away clients seeking new swap trades in the two Korean stocks while some second-tier banks have also stopped accepting additional orders in the past two weeks, the people said. Some large global banks that are still willing to take new orders are assessing requests on a case-by-case basis, they added.

The moves came after a wild run in the two companies’ shares this year, part of a global boom in tech stocks that is fuelling fears of a bubble. The stock price of SK Hynix has more than tripled this year, while Samsung Electronics is up over 175 per cent. These moves have helped Korea’s benchmark Kospi Index jump around 100 per cent, making it the best performing market in the world.

But the chipmakers’ shares have recently come under pressure: Both SK Hynix and Samsung Electronics tumbled on Wednesday (Jun 10), as the tech rally faltered. At least some of the curbs started before the recent sell-off, the people said.

Bank of America, BNP Paribas and UBS Group are also lifting financing costs and restricting the size of swap trades in the two stocks, the people said.

Swaps are a popular way for hedge funds to bet on assets without actually owning them and with the aid of leverage. In markets like South Korea, where few hedge funds have their own trading IDs with the exchange, swaps with brokers are the default way to bet on stocks.

Swap financing rates quoted by the banks on SK Hynix and Samsung Electronics were increased to a range from 300 basis points to as much as 11 per cent over the secured overnight financing rate (SOFR), the people added. With SOFR standing at 3.6 per cent, the new rates translate into nearly 15 per cent at the top end of the range.

That compares with financing rates between around 100 and 200 basis points above SOFR in early May, the people said. The new rates apply to new swap contracts or those being rolled over, they added.

While banks writing swaps often find other counterparties to take the other side of hedge fund clients’ trades, few firms are willing to make bearish bets on the gravity-defying gains of SK Hynix and Samsung Electronics. That means banks sometimes have to deploy their own balance sheets, putting a constraint on how much business they’re willing to take.

Banks are concerned that a major correction would affect the value of their clients’ holdings, leading to potential defaults on margin calls and ultimately threatening losses for banks, the people said.

While one benefit of swap trades has traditionally been the built-in leverage, some banks are now insisting clients pay up in full for those positions, said the people.

Mega-IPOs including SpaceX’s US$75 billion listing this week are also expected to tie up bank balance sheets, giving them more incentive to control the amount of capital they deploy to trades in SK Hynix and Samsung Electronics, the people said.

Citigroup, JPMorgan, Goldman Sachs and UBS declined to comment. Bank of America and BNP Paribas did not immediately respond to requests for comment.

AI frenzy

Hedge funds have shown huge interest in South Korea over the past year, after regulators lifted a short selling ban and pushed through corporate governance reforms. But much of the focus has been on the chipmakers, which are seen as key beneficiaries of the global AI race.

SK Hynix and Samsung Electronics between them now represent around 53 per cent of Korea’s benchmark Kospi Index. That is more than double their combined weight five years ago, before the frenzy around AI transformed global markets.

The insatiable demand for these stocks has in part been fuelled by exchange-traded funds. Roundhill Investments’s actively managed Memory ETF has seen assets surge to US$16.7 billion after its inception in early April. SK Hynix and Samsung Electronics account for more than 40 per cent of its holdings as of Thursday, according to information posted on the website of the New York-based company.

CSOP Asset Management’s eight-month-old, Hong Kong-listed ETF seeking to replicate twice the daily performance of SK Hynix shares surpassed US$10.9 billion in assets at the start of this month, according to data compiled by Bloomberg.

Financing rates quoted by banks for swap trades involving the same stocks vary wildly from bank to bank, and from client to client. They can depend on what sort of other assets – and how much – a hedge fund holds at the time, the strength of its relationship with brokers and the banks’ ability to facilitate more trades.

The Kospi tumbled nearly 9 per cent intraday on Monday, triggering a 20-minute trading halt by the exchange as investors pulled back from AI trades. SK Hynix’s shares are down this month, while the CSOP fund’s assets have declined. BLOOMBERG