▲ AI PRISM* Personalized Economic Briefing
* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.
[Key Issues Briefing]
■ Pension fund selling: Pension funds net sold a combined 183.2 billion won worth of KOSPI and KOSDAQ shares between the 6th and the 15th of this month, a period in which the KOSPI fell from 7,003.74 to 5,554.22. Pension funds, which have long served as a buyer of last resort whenever market volatility spikes, appear to have limited room for bargain hunting this year because their holdings have reached the ceiling.
■ Margin debt warning: With domestic stocks falling for consecutive sessions, fears of forced liquidations surrounding more than 30 trillion won in leveraged investing have spread again. Investor deposits at brokerages have also fallen below 100 trillion won for the first time in a month, adding strain to market liquidity.
■ Diverging AI sentiment: Taiwan Semiconductor Manufacturing Co. posted a record net profit for a sixth straight quarter on demand for AI chips. By contrast, U.S. inflation data came in above expectations and rattled technology shares, wiping more than $50 billion off the combined wealth of Big Tech founders in a single day — a sign of the widening gap in sentiment around the AI rally.
[News of Interest to Financial Product Investors]
1. Pension Funds Tied to Holding Caps Sold 183.2 Billion Won Into the Slump
- Key summary: Pension funds have drawn criticism for failing to act as a market backstop, selling into the sharp index decline instead. According to the Korea Exchange, pension funds net sold a combined 183.2 billion won in KOSPI and KOSDAQ shares between the 6th and the 15th of this month, a stretch in which the KOSPI fell from 7,003.74 to 5,554.22 and the KOSDAQ index from 893.29 to 760.82. So far this year they have sold 9.0256 trillion won worth of shares on the KOSPI alone. In May, the National Pension Fund Management Committee raised the target weighting for domestic equities to 20.8% from 14.9% and widened both its strategic asset allocation and its tactical asset allocation band of plus or minus 2 percentage points, allowing holdings of up to 28.8%. But the actual weighting stood at about 29.1% at the end of June, above the ceiling, leaving little scope for additional purchases.
2. Margin Debt Up 6 Trillion Won in Two Months as Forced-Liquidation Fears Return
- Key summary: The market slump has revived fears of forced liquidations. According to the Korea Financial Investment Association, actual forced liquidations against unpaid brokerage receivables came to 89.3 billion won as of the 14th, up 50.5% from 59.4 billion won the previous trading day and the largest amount since July 31, when the figure was 122 billion won. The outstanding balance of margin loans fell for a second straight day to 33.7057 trillion won, but that is about 6 trillion won higher than in early August, when it stood in the 27 trillion won range, an increase over roughly two months. Investor deposits, meanwhile, fell more than 2 trillion won from the previous session to 97.428 trillion won, slipping below the 100 trillion won mark for the first time in about a month.
3. TSMC Third-Quarter Revenue Rises 17% From Prior Quarter as Margins Narrow
- Key summary: TSMC, the world's largest contract chipmaker, posted record third-quarter results on surging demand for AI chips. Net profit rose 68.7% from a year earlier to 763.06 billion New Taiwan dollars (about 31.8 trillion won), a record for a sixth consecutive quarter. Revenue rose 17.6% from the previous quarter to 1.49424 trillion New Taiwan dollars (about 62.2 trillion won), and high-performance computing accounted for 68% of revenue, up 11 percentage points from a year earlier. Gross margin, however, slipped 1.3 percentage points to 66.4% from 67.7% in the previous quarter. TSMC attributed the decline to costs tied to the early ramp-up of its 2-nanometer process.
[Reference News for Financial Product Investors]
4. Dell and Musk Among Losers as Tech Selloff Erases 67 Trillion Won From Big Tech Owners
- Key summary: U.S. stocks fell after the September consumer price index came in above market expectations, erasing more than $50 billion (about 67 trillion won) from the combined wealth of the world's Big Tech billionaires. According to the U.S. Bureau of Labor Statistics, the September CPI rose 0.6% from the previous month, and the 12-month increase of 3.7% was slightly above economists' estimate of 3.6%. The net worth of Michael Dell, founder of Dell Technologies, fell by more than $20 billion (about 27 trillion won) in a single day, costing him his position as the world's fourth-wealthiest person, while Elon Musk's fortune declined by $17.6 billion (about 24 trillion won). Mark Zuckerberg's wealth fell by about $6.2 billion (about 8 trillion won) and Nvidia's Jensen Huang lost about $4 billion (about 5 trillion won).
5. Chipmakers' Spare Cash Flows In as Deposit Growth Hits 44-Month High
- Key summary: The money supply expanded by more than 39 trillion won in a single month in August, driven in part by deposits from semiconductor companies. According to the Bank of Korea's money and liquidity data, the average balance of M2, the broad measure of money supply on a seasonally adjusted basis, rose 39.1 trillion won, or 0.9%, from the previous month to 4,266.8 trillion won, marking a 10th straight monthly increase since November last year. By product, time and savings deposits with maturities of less than two years rose 28.7 trillion won, the largest increase since December 2022, while money trusts of less than two years and money market funds rose 14.2 trillion won and 12.6 trillion won, respectively. The average balance of M1, the narrow measure covering cash and demand deposits, fell 1.1% from the previous month to 1,357.6 trillion won, indicating that short-term liquidity contracted.
- Key summary: Hanwha Life Insurance plans to issue up to 800 billion won in capital securities. Its solvency ratio under the Korean Insurance Capital Standard stood at 167% in the first half, above the level recommended by financial regulators, but concerns have grown that the ratio could fall as the company commits about 690 billion won to the 440 billion won acquisition of Acquon Capital and a 250 billion won rights offering by its subsidiary Hanwha Investment & Securities. According to investment banking sources, Hanwha Life Insurance has sent requests for proposals to domestic brokerages to select underwriters, and subordinated bonds, which count as supplementary capital for accounting purposes, are seen as the most likely instrument. The company also faces repayment pressure because holders of $750 million (about 1 trillion won) in subordinated bonds raised from overseas institutions in 2022 can request early redemption starting in February next year.
