Hedge funds turn to South Korea for next wave in AI
Changes wording "too much" to "significant" in paragraph 16 to reflect quote
By Summer Zhen
HONG KONG, July 11 (Reuters) -Hedge funds hunting for artificial intelligence-related stock market bargains are rushing into South Korea's chipmakers, betting a new wave of demand for high-end memory chips and government spending makes them more valuable.
Britain's Man Group EMG.L, Singapore's FengHe Fund Management and Hong Kong's CloudAlpha Capital Management and East Eagle Asset Management are among the hedge funds seeking AI exposure in Asia that are looking to South Korean behemoths such as SK Hynix 000660.KS and Samsung Electronics 005930.KS, which have so far lagged the sector's rally.
"If we consider Nvidia the king of the AI story, then Hynix is the queen," said Matt Hu, chief investment officer of $4 billion FengHe, which has been buying Hynix and Samsung this year.
FengHe and other hedge fund investors believe the AI frenzy over the past year that trebled the value of U.S.-listed Nvidia's NVDA.O shares to more than $3 trillion has left behind stocks such as Hynix relative to more popular Asian AI players such as Taiwan's TSMC 2330.TW.
But the spotlight is turning to South Korean chipmakers as technology firms in the generative AI race scurry to secure high-bandwidth memory (HBM) chips manufactured primarily by Hynix, Samsung and U.S.-based Micron Technology MU.O.
Hynix is the top supplier of advanced HBM memory chips to Nvidia. FengHe's Hu estimates Hynix receives a larger proportion of its revenue from Nvidia than TSMC does, but Hynix trades at 9 times its 12-month forward earnings versus 23 times for TSMC.
There are other broader tailwinds to these shares, such as the South Korean government's 26 trillion won ($19 billion) support package for the chip industry and its new 'Corporate Value-up Programme', along the lines of similar efforts in Japan and China to improve shareholder returns.
The rush of hedge fund cash into South Korea's AI sector helped the benchmark KOSPI index .KS11 register its best month in seven months in June. South Korean stocks attracted the strongest inflows among Asia emerging markets so far this year, and their biggest inflows since 2008, according to LSEG data.
The rewards of being invested in South Korea outweigh the big risks, hedge funds say, namely pressure from a depreciating Korean won KRW= and restrictions on short-selling of shares in the local market.
KOSPI is trading at 10 times 12-month forward earnings, compared with Taiwan's .TWII 18 times and Japan's .TOPX 15 times.
MORE MEMORY
Samsung and Hynix account for about 30% of KOSPI by market capitalisation.
While Hynix shares are up more than 70% this year, Samsung is up only 12% and the overall KOSPI nearly 9%.
Beyond HBM chips, scarcity in the supply of broader memory chips has further bolstered South Korean suppliers. Samsung said last week it expected a more than 15-fold rise in its second-quarter operating profit, thanks to rising chip prices.
Sumant Wahi, a portfolio manager at Man Group focusing on technology stocks, expects prices of traditional Dynamic Random Access Memory (DRAM) chips to rise too because the chip industry has shifted significantcapacity to manufacturing HBM.
"There's definitely an opportunity there," he said.
Pierre Hoebrechts, head of macro research at East Eagle Asset Management, expects Samsung to catch up in the second half due to its significant underperformance compared to TSMC this year.
The South Korean AI theme is also broadening beyond chipmakers.
Chris Wang, a portfolio manager at tech-focused CloudAlpha Capital Management, has invested in electricity equipment maker HD Hyundai Electric 267260.KS this year, betting the stock will benefit from the spurt in power consumption. Its shares are up 333% since January.
"Korea has the potential to sell more semiconductor equipment, cooling systems and even consumer electronics along with the growing AI ecosystem," said Simon Woo, Asia-Pacific technology research coordinator at BofA Securities.
The long-running Sino-U.S. technology war also ensures China keeps using South Korea's advanced memory chips, given Chinese chipmakers have so far been unable to compete while under U.S. export bans, Woo added.
Monthly foreign investment flows into Asian equities https://tmsnrt.rs/3KYLE0Q
Reporting by Summer Zhen; Additional reporting by Rae Wee in Singapore and Gaurav Dogra in Bengaluru; Editing by Jamie Freed
Ativos relacionados
Últimas notícias
Isenção de Responsabilidade: As entidades do XM Group proporcionam serviço de apenas-execução e acesso à nossa plataforma online de negociação, permitindo a visualização e/ou uso do conteúdo disponível no website ou através deste, o que não se destina a alterar ou a expandir o supracitado. Tal acesso e uso estão sempre sujeitos a: (i) Termos e Condições; (ii) Avisos de Risco; e (iii) Termos de Responsabilidade. Este, é desta forma, fornecido como informação generalizada. Particularmente, por favor esteja ciente que os conteúdos da nossa plataforma online de negociação não constituem solicitação ou oferta para iniciar qualquer transação nos mercados financeiros. Negociar em qualquer mercado financeiro envolve um nível de risco significativo de perda do capital.
Todo o material publicado na nossa plataforma de negociação online tem apenas objetivos educacionais/informativos e não contém — e não deve ser considerado conter — conselhos e recomendações financeiras, de negociação ou fiscalidade de investimentos, registo de preços de negociação, oferta e solicitação de transação em qualquer instrumento financeiro ou promoção financeira não solicitada direcionadas a si.
Qual conteúdo obtido por uma terceira parte, assim como o conteúdo preparado pela XM, tais como, opiniões, pesquisa, análises, preços, outra informação ou links para websites de terceiras partes contidos neste website são prestados "no estado em que se encontram", como um comentário de mercado generalizado e não constitui conselho de investimento. Na medida em que qualquer conteúdo é construído como pesquisa de investimento, deve considerar e aceitar que este não tem como objetivo e nem foi preparado de acordo com os requisitos legais concebidos para promover a independência da pesquisa de investimento, desta forma, deve ser considerado material de marketing sob as leis e regulações relevantes. Por favor, certifique-se que leu e compreendeu a nossa Notificação sobre Pesquisa de Investimento não-independente e o Aviso de Risco, relativos à informação supracitada, os quais podem ser acedidos aqui.
