Global funds entered short positions in Hong Kong tech stocks earlier this year to raise capital for investments in South Korea's chip giants. The strategy created a notable correlation between the two markets as hedge funds sold Hong Kong shares to fund purchases of Korean semiconductor companies like Samsung Electronics and SK Hynix.

Recent data indicates this trade structure is rapidly unwinding. Correlation metrics between the Hang Seng Tech Index and Korea's KOSPI have shifted significantly, suggesting the short-covering in Hong Kong and profit-taking in Korea are accelerating simultaneously.

The unwind reflects changing macro conditions including China's policy stimulus measures boosting Hong Kong equities and semiconductor cycle concerns pressuring Korean chip stocks. Fund managers appear to be closing both legs of the pairs trade as the original thesis deteriorates.