Why is a back door China shut on June 23 turning into selling in Korean chip stocks now?

Some of the foreign selling in Korean chip stocks may be Chinese money being liquidated under compulsion. On the evening of Tuesday, June 23, China's securities regulator gave brokerages verbal guidance that blocked both new total return swap contracts on offshore stocks and the renewal of contracts coming due.

China securities regulator ordered cross-border swap curbs (Reuters, 2026-06-26)

출처: theedgemalaysia.com

That report puts the affected book at 500 billion yuan, or 73.5 billion dollars, and says most of it sits in overseas equities. It also confirms that contracts reaching maturity cannot be rolled over.

What a total return swap is

A total return swap is a contract where someone else buys the stock in their own name and you collect only the gain or loss. Put simply, the name stays with the lender and only the outcome comes back to you. Say a Chinese private fund wants to own SK Hynix but capital controls keep it from sending dollars abroad. It signs this contract with a foreign broker such as Goldman Sachs or Morgan Stanley, the broker buys and holds the shares under its own name, and only the price difference is settled inside China. The money never crosses the border while the offshore gain or loss lands anyway. With Chinese equities and property both weak, demand reportedly poured through this channel into US, Japanese and Korean technology stocks.

Why something blocked in June is landing now

These contracts are short. They come in one, three and six month terms, mostly three, and the way they lasted longer was by being rewritten each time they matured. Block the renewal and the position has to be sold the moment it comes due. Because the contracts were struck on different days, the maturities are scattered across June 23 to September 22. Then July brought a sharp drop in AI and memory names, and with it demands for more collateral. Anyone who could not wire dollars in time, because of the same capital controls, reportedly had no option but to sell what they held.

How much of it is Korean

This is the spot where the original post says it does not know. The split of that 73.5 billion dollars by country is not disclosed. That the money reached Korea at all, though, can be confirmed elsewhere.

China closes another offshore investing loophole as TRS faces restrictions (South China Morning Post, 2026-06-24)

출처: scmp.com

That article names the targets of the guidance as surging US, Japanese and South Korean technology stocks, and says the funds hit hardest are private funds holding more than 30 percent of their assets in Hong Kong and US shares. The original post could only say the Korean share was unknown. The report names Korea as one of the destinations. One more thing splits here. When the broker holding the position sells the shares, the Korean tape records it as foreign selling. The money is Chinese by nationality, and the screen shows one line that says foreign.

Where the money went instead

The cash that could not leave had somewhere to go. CXMT, the Chinese memory maker that listed on July 27. China needs to defend the yuan, build up artificial intelligence, make its chip supply self-sufficient and hold up its own stock market, all at once. Read that way, this rule may be less a patch on a leak than one piece of a policy that removes the exits and pushes the money toward domestic advanced industry.

So what settles it

The question comes down to one thing. Is the foreign selling arriving now a verdict on Korean chip earnings, or the calendar of maturities. If the selling holds at the same intensity past September 22, the maturity explanation runs out there. If it fades before then, much of it was the renewal ban. Flows through these contracts are not published by country, so there is no way to carve out this channel's share of the Korean decline as a number. Safer, then, to read it not as the cause of this selloff but as one more line on the list of causes.