Funds with high exposure to Nvidia, Samsung yield higher returns

It's time again to snap up semiconductor stocks – the market darlings these days.

Just like its global peers, including the New York Stock Exchange and the Nasdaq, South Korea’s main bourse is on an uptrend trajectory led by the likes of Samsung Electronics Co. and SK Hynix Inc., namely, chipmakers.

Those retail investors, afraid of direct stock purchases, are instead buying into exchange-linked funds (ETFs) with high exposure to Korean chipmakers as well as US peers such as Nvidia Corp. and Microsoft Corp. to ride on the artificial intelligence boom.

Timefolio Asset Management’s TIMEFOLIO Global Artificial Intelligence Active ETF, listed on the Kospi market, has gained 19.4% since its launch on April 16.

Shares of Nvidia account for 27.6% of the ETF, the largest ratio among Korean ETFs that invest in Nvidia. The Timefolio ETF has also filled its bag with Microsoft and SK Hynix.

The ACE Global Semiconductor TOP4 Plus SOLACTIVE ETF, run by Korea Investment Management Co., has filled 24.6% of its portfolio with Nvidia shares. With its year-to-date return of over 50%, the fund is among Korea’s top-performing semiconductor-related ETFs.

AI REVOLUTION DRIVES NVIDIA’S SHARE PRICE HIGHER

Driven by growing demand for graphic and other advanced chips for artificial intelligence applications, Nvidia saw its shares rise sharply in recent weeks – up 39% over the past month – to $401.11 on Tuesday. Nvidia’s market capitalization has risen above $1 trillion, the first chipmaker to reach that level.

Shinhan Asset Management Co.’s Shinhan Samsung Electronics Alpha Securities Master Investment Trust holds Samsung Electronics shares close to 21.7% while the rest of the portfolio is filled with bonds since the ETF is classified as bond-type.

The Shinhan ETF, suitable for investors inclined to invest in safe assets, has amassed Samsung shares since the chipmaker was hovering around 50,000 won to 60,000 won ($38~$45) a share.

On Wednesday, Samsung fell 1.2% to close at 71,400 won. The previous day, the stocks finished up 2.8% at 72,300 won, its 52-week high.

The main Korea Stock Price Index, or Kospi, fell 0.3% to 2,577.12 on Wednesday, taking a breather from hitting its one-year high on Tuesday.

Shinhan Asset’s other chip-related fund, Shinhan SOL KEDI Mega Tech Active ETF, is also performing well with Samsung Electronics comprising 5.58% of its portfolio, followed by SK Hynix at 7.48% and SFA Engineering Co., a Korean chip equipment maker, at 3.35%.

The KODEX US Semiconductor MV with Nvidia accounting for 16.4% of its portfolio, has shown a return of 55.3% year to date.

SEEK HIGHER WEIGHTING OF SAMSUNG

Korean fund managers are seeking to raise the weighting of Samsung Electronics in their portfolios in order not to miss the current boom.

"Back in 2017, many domestic fund managers sold Samsung Electronics right before the semiconductor rally and had to suffer losses. Institutional investors are buying up Samsung, the largest stock on the main bourse, to keep up with the benchmark indices,” said a local fund manager.

HANARO MSCI Korea TR, an ETF managed by NH-Amundi Asset Management Co., keeps its weighting of Samsung to 29.9%, posting a return of 19.4% so far this year.

In contrast, the ARKK, run by Cathie Wood Ark Investment, is struggling to raise its return on investment after selling its entire Nvidia holdings in January.

Write to Man-Su Choe at bebop@hankyung.com

In-Soo Nam edited this article.