Banks have tightened hedge‑fund exposure to South Korea’s chip giants SK Hynix and Samsung Electronics after a blistering rally this year raised fears of a pullback. Citigroup, JPMorgan, Goldman Sachs and UBS raised swap financing rates and limited trade sizes, while Morgan Stanley stopped new swap orders in the two stocks for hedge funds investors.

Swap financing rates climbed from about 100‑200 basis points above SOFR in early May to a range of 300 basis points up to 11% over SOFR, translating to nearly 15% at the top end when SOFR sits at 3.6%. Banks apply these higher rates to new contracts and roll‑overs for hedge fund traders seeking leverage.

Banks fear that a sharp correction would hit the value of client holdings, trigger margin calls and force defaults that could erode their own balance sheets. By demanding full payment for leveraged positions, banks curb the scale of bets and protect against potential losses in volatile market conditions tightening credit availability and reducing profitability.

SK Hynix and Samsung Electronics together now account for 53% of the Kospi index, more than double five years ago, while ETFs like Roundhill’s Memory and CSOP’s leveraged SK Hynix fund have amassed over $27.6 billion in assets. Banks’ tighter stance limits leverage, likely cooling rapid price gains in the sector for institutional investors in tech sector.