STOCKS | Investors Turn Cautious on South Korean Stocks as Hedging Activity Increases

Optimism in South Korea’s stock market is fading as more investors hedge and cut positions amid concerns that the rally has risen too far, too fast. According to Jin10, hedge fund Golden Horse has reduced risk exposure and increased the use of derivatives as hedging tools, while Prudential Investment has trimmed holdings in storage-chip and wafer-manufacturing stocks and shifted positioning toward the downstream segment of the artificial intelligence supply chain. Analysis of options tied to the iShares MSCI Korea Index ETF showed investors buying put contracts for downside protection. The ETF fell 14% in the U.S. market last Friday. The moves highlight challenges facing global asset managers. Golden Horse executive partner Yi Ling Ong said the fund slightly reduced overall positions in recent weeks while adding derivatives hedges. She also said several large IPOs this month, including SpaceX, were likely to prompt institutions to take profits to participate in new share subscriptions, adding that holding a certain amount of cash was a prudent choice.