The most intense wave of selling in Korean and U.S. semiconductor trades may be in its later stage, according to WuBlockchain’s WhiteLine Daily. But weaker selling pressure does not mean positions have been fully cleared, and it does not mean valuations are already cheap.
JPMorgan puts Korea leveraged ETF deleveraging at 75%
JPMorgan said assets under management in Korea-related leveraged ETFs dropped from $50 billion at the end of June to $26 billion. The bank set $18 billion as a “fair” size for the segment. Using that framework, $24 billion of the required $32 billion reduction has already taken place, which puts deleveraging progress at 75%.
WhiteLine Daily said that figure can be misunderstood. ETF assets equal shares outstanding multiplied by net asset value. If prices fall sharply, AUM can contract even without investor redemptions. In that sense, the 75% figure shows how far AUM has moved toward the target, not that retail investors have sold 75% of their positions.
The report also cited data moving in the opposite direction. Cumulative inflows into leveraged products tied to SK Hynix rose from about $3.9 billion to $6.2 billion. Korean regulators also raised the new cash eligibility threshold for single-stock leveraged ETFs to roughly $20,400, and moved the effective date forward to July 31. WhiteLine Daily said that suggests speculative demand has not materially cooled.
U.S. semiconductors: fast unwinds, still-heavy positioning
A summary of Goldman Sachs Prime Book client data showed net exposure to global semiconductor and equipment names rising from 10% at the start of the year to 24% in June, before slipping back to 19%. In the U.S., exposure climbed from 7% to 14% and has now eased to 11%.
That points to meaningful reductions by some of the most crowded institutional positions. The report also said capital has recently moved back into STX, WDC, MU, SNDK, as well as AMAT, ASML and LRCX. WhiteLine Daily added that Goldman had earlier described the selling as profit-taking rather than a full reversal of the AI trade.
Even after that pullback, positioning remains high. Global exposure is still in the 97th percentile on a five-year basis, while U.S. exposure sits in the 96th percentile. The fast part of the unwind may be largely behind the market, but positioning itself has not returned to low levels.
Mechanical selling is easing, but deleveraging is not over
WhiteLine Daily said the Korean and U.S. data point to the same conclusion: mechanical selling pressure is falling, while account-level deleveraging remains unfinished.
For Korea, the report said clearer evidence would include ETF share redemptions, margin repayment and retail investors no longer adding to positions. For the U.S., it said Prime Book exposure would need to keep falling, rather than simply showing a short-term rebound after a sharp drop.
The report’s bottom line was that a rebound can now be discussed, but “selling is less urgent” should not be mistaken for “a new round of semiconductor beta has already begun.”