JPMorgan Sees Less Room for Concentrated Selling as U.S. Retail Buys Tech Stocks

U.S. retail investors bought more individual technology stocks in the week through Oct. 21, while JPMorgan strategist Nikolaos Panigirtzoglou and his team said reduced hedge-fund exposure may limit further concentrated selling.

JPMorgan strategist Arun Jain tracked flows from Oct. 15-21 and found that retail buyers increased purchases of semiconductor, cloud and storage companies. SanDisk, Taiwan Semiconductor Manufacturing Co. and Nebius were among the most-purchased stocks. Retail purchases of individual technology stocks reached their highest level since momentum trades reversed in July.

Technology exchange-traded funds (ETFs) saw their second-largest weekly inflow on record, including a record single-day inflow on Oct. 16. The ETF flows and purchases of individual stocks are separate measures of investor activity.

Positioning also showed crowded short exposure. Short sales were about five to one against long purchases, while short leverage in client books stood at the 99th percentile of the past five years. Net leverage among fundamental long-short equity funds was near a three-year low even as gross leverage increased. A catalyst for technology shares could force some crowded short positions to be covered.

In South Korea, forced stock sales fell to 12.9 billion won on Oct. 21 from 22.6 billion won a day earlier. They had exceeded 50 billion won for five consecutive trading days between Oct. 13 and 19. Credit-financing balances fell to 30.271 trillion won, while investor deposits dropped to 89.6343 trillion won, their first dip below 90 trillion won in about nine months.

Foreign investors bought Samsung Electronics shares for four straight sessions through Oct. 21, with net purchases totaling 1.3247 trillion won after about 7.8 trillion won in net sales over the prior 12 sessions. They also bought 200.6 billion won of SK hynix shares on Oct. 21, ending an 18-session selling streak. The recent buying does not establish a lasting improvement in foreign flows.

Panigirtzoglou and his team said hedge funds had sharply reduced equity risk, potentially leaving less room for another concentrated wave of selling. They identified semiconductor exposure as a gauge of hedge-fund risk and cited returns on AI investment, financing pressure and concentrated positions as continuing risks. Reduced selling pressure does not mean the market has bottomed.