00:00I guess the very popular song of Tracy Chapman, similar name, this market is moving quicker than
00:07a fast car, getting these triggered. So another day, so I'm losing count now of the number of
00:12days this month that we've seen either the COSDAC or the COSPI just get halted because of just how
00:20volatile things have been. But yes, that's where we are currently. So we'll revisit, of course,
00:24what goes on there in about 20 minutes when things, of course, resume trade. Joining us here on set
00:28to help us make sense of where exactly we are on the COSPI story in the broader Asian markets.
00:33Joining us here is Frank Benzimra, head of Asia Equity Strategy at Sokjun. Frank, very nice to see you
00:39and good morning. Has Korea come up? Well, Korea is by far the most volatile market. That's very
00:49interesting to see that the company now, the semiconductor companies are publishing record
00:54earnings. But we are at top margin. And the market is reminding that this market is cyclical.
01:01And we have on top of that, and maybe a little bit unlike what we see in the US,
01:07we have the leverage, which is super concentrated on few names. So when we put all this, we have this
01:14volatility on the market.
01:17What to do now about, what was the advice to clients about Korea?
01:22Well, that to Korea, you have the semiconductor Korea, where you have some deleveraging, which is
01:30happening, which is not being done, and on which we need to be cautious. And then you have the other
01:36Korea.
01:37You remove the top two semiconductor name. Then you have a price to book of 1.5 times,
01:44at a time when you have some governance reform, which are happening, and the pretty good level
01:51of earnings. And I think this is this kind of Korea that we need to focus on now.
01:57Yeah, there's certainly a lot of cross currents that you're talking about here. Obviously,
02:01this whole China DUV sort of lithography, whatever innovation that we've been seeing,
02:06according to some reports from the information, that certainly is roiling the chips trade here today.
02:10You add that to the NVIDIA story, and these big, massive frenzy of deals that they keep making
02:14here with the likes of Esky Hynix and the like is, once again, sparking those concerns of circular
02:20deals, right? So you're seeing that being reflected across the bond market, credit market, spreads are
02:24winding out, and the like. So there's quite a bit of angst, not just in this equity market, but also
02:29when it comes to bond markets as well. Take a look when it comes to the open in China, and
02:33they are not
02:33immune to this sell-off here today. You see the ChinaX, specifically the tech-heavy benchmark,
02:39that's already lowered by 3% here right now. You are seeing some big names like Capricorn Tech,
02:45that's down by 2%. CATL also seeing a bit of pressure in the A-share market. But interesting
02:50enough, in terms of bright spots, it's the consumer space, right? So maybe there is a bit of that
02:54rotation out of those AI plays here this morning to the likes of Medea Group, Kuei Chau, Maltai,
02:59and the like. I mean, take a look when it comes to what we're seeing across the tech gauges here.
03:03Obviously, yesterday, it was about CXMT. We are seeing even that stock come off just a bit here
03:09today. But this is what the chips sector is seeing here. So you are seeing like the Huahong Semi.
03:15SMIC is actually going the opposite direction, but most of them are slightly lower here. On the back of
03:20this report, right? You know, this whole, it was all happening, ASML shares on just one report itself
03:27of what China may be doing. A state-backed company in China is mass producing these deep ultraviolet
03:34lithography tools. So, you know, this adds to the whole kind of tech self-sufficiency sort of theme
03:41that we've been seeing alongside CXMT yesterday. How true and how much it delivers is certainly one
03:46thing that the sell side is really mapping out here today. I think most of the sell side have chimed
03:52in
03:52and said, look, when it comes to that technological gap between China and Western names right now,
03:58it's still quite wide, right? You know, Masahiro, our BI analysts say it's seven to 10 years it would
04:04take to actually close it at this point. So maybe right now, markets are going ahead of it.
04:09KOSDAQ has now triggered the circuit breaker, trading halted after that index fell by 8% as well. So
04:15trading in South Korea's KOSDAQ now also in a trading halt. Well, let's get more details now
04:22on those stories fueling this AI angst across Asia. Our China correspondent Min Min Lo joins us from
04:28Hong Kong along with Asia Equities reporter Winnie Su. So Min Min, let's start with you. What do we know
04:34about the scale at which China can produce DUV machines? Because this has been one of the catalysts
04:39that's seeing the sell-off today. That's right. And this is according to the information's reporting
04:46and according to their sources, China is planning to produce five of these machines this year and
04:5120 next year. This is a particular company that is based in Shanghai. It has not been named by the
04:57information, but it's a homegrown company that is gathering expertise from other Chinese firms,
05:02including a state-backed startup as well. And according to the information, most of the components
05:08of these DUV machines are locally sourced, except for some key components that are coming from Japan.
05:14So this is sparking the sell-off because we know that ASML has been a major player, in fact,
05:20very dominant, one of the few monopolies out there in this sector. And ASML has been prevented from
05:27selling its most advanced machines to China. Now, mind you, these DUV machines are not top of the range.
05:33The most advanced machines that ASML can sell are the EUV, extreme ultraviolet lithography
05:38machines. DUV is deep ultraviolet lithography machine. So it's slightly less advanced, but still,
05:45the vast majority of chips require only a DUV machine. Only a small sliver of the most advanced
05:50chips require EUV machines to make. So this is why we are seeing the market sell-off here in Asia
05:56as well,
05:56when it comes to the Cosby, the Tyaxe, and many of these tech names in Asia.
06:00Hey, I want to get to Winnie Sue for the second one of those one-two punches. And Winnie, it's
06:03all about
06:05circular financing. I mean, Nvidia's announced a bunch more deals financing and taking stakes
06:09in projects that are going to use its chips. I mean, you know, there's been worries about
06:13circular financing for some time. Why has it all come to a head today?
06:19Yeah, exactly, Paul. You just mentioned how actually we've been hearing about this since last year,
06:24but because of these concerns around the hyperskater's spending recently, that is really
06:30raising further concerns around this circulation that we're looking at. Now, it is all about how
06:36companies like Nvidia are financing the support for its key customers. And these customers then have
06:44further money or funds to then buy more from Nvidia. And some of the examples we're hearing recently is,
06:51for example, the one with SK Group committing about $500 billion between each other. So it is
06:59circulation because it includes SK Group buying these supercomputers from Nvidia, and then Nvidia
07:05also buying memory chips from SK Hynix. Now, this is a little bit unclear in terms of how this money
07:12is
07:12actually going to be divided. So that is why investors are a bit concerned in terms of how
07:17it's a bit less transparent. Now, when it comes to the deal or that talk that we heard from yesterday
07:23about them potentially backstopping about $250 billion for OpenAI to lease that $500 billion worth of
07:35data center being built out by SoftBank in Ohio. That is a bit more complicated with
07:43them providing that $200 billion to support the build out of SoftBank. And SoftBank has a big stake in OpenAI,
07:51and they really lease that data center to OpenAI. Then OpenAI, which is a key customer of Nvidia,
07:58buys further chips from Nvidia. So that kind of circulation is...
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