00:00Joined now by Matt Maley, Chief Market Strategist at Miller Tobac.
00:04Matt, thanks so much for your time.
00:07Record profits for SK Hynix, but shares are dropping. Why is that?
00:12Well, Sally, it's something we've been seeing, you know, for the last several weeks, almost two months now,
00:19in the semiconductor, the chip sector around the world.
00:23I mean, we saw it last month with both Broadcom and Micron here in the U.S.
00:33We also saw it with Samsung earlier this month, Taiwan Semiconductor.
00:37Again, that was about a week and a half ago, and now SK Hynix.
00:42It's just that the expectations were so high, priced for perfection, so that if you get any kind of a
00:50–
00:50I guess my point is, even the ones who reported great numbers and great guidance, they've gotten hit.
00:56So the ones that have reported, you know, something lower than expectations, they're getting hit even harder.
01:02Is there something more at play with KOSPI, though?
01:05Because we've, in the last few hours, South Korea's finance minister has been apologizing,
01:10suggesting there's more than just the global tech sell-off at play.
01:15Well, you know, there is to a certain degree, because there is that added leverage we see in South Korea,
01:21not just from these leveraged ETFs in the tech sector, but also the single-stock leveraged ETFs.
01:28And, you know, whenever you have leverage, you know, it's funny, leverage can add and help the market go a
01:34lot higher,
01:34but then, you know, it works in both directions, and that's what we're seeing.
01:37So they're starting to make some moves to kind of take away some of that leverage.
01:42That will hopefully help things stabilize.
01:45But when you have excess leverage and a lot more than we have in most other parts of the world,
01:49it exacerbates the moves.
01:52Yeah.
01:53And South Korea's finance minister holding that emergency meeting earlier in the day.
01:57Some of the trading rules have changed, but we've seen three interventions from the government since June in South Korea.
02:04Do you think that this latest intervention will actually make a difference?
02:09Well, you know, it's always hard to know, you know, when that will happen, to see the absolute bottom,
02:15because there is a lot of leverage in that system.
02:18So just because they're discontinuing or clamping down on future leverage,
02:23that doesn't mean that people still don't have some that will need to be unwound.
02:26But, you know, what I'm looking at right now in the COSPI index is watch the 5,000 level.
02:32It's just a little bit above 5,000.
02:34That's where it bottomed a couple of weeks ago and bounced.
02:38I'm sorry, that's where it bottomed back in March and bounced.
02:41And so that should provide some good support.
02:44Keep an eye on that over the next couple of days.
02:46If we break below that, it's going to create some real problems.
02:49But what they've been doing recently, that should provide some good technical support.
02:53Does this have a lesson in terms of inherent risks when a country stock exchange is dominated essentially by two
03:01companies?
03:01Samsung, SK make up about 40 percent of its value.
03:07Yes, Sally, that's definitely a problem.
03:09And I hate to say it, but it's also a problem in the U.S.
03:12We don't have just two companies.
03:14But, you know, you just notice that the MAG-7 names make up about 35 percent of the S&P
03:21500.
03:21So there's a few more names, but it's still highly concentrated.
03:25And, you know, so it's a situation where people need to be very careful.
03:29And it makes it much, much harder for people to see rotation.
03:32Because when these key stocks go down, the indexes go down because they're so highly weighted.
03:37And that takes away a lot of confidence in the marketplace.
03:40Thank you so much for speaking to us.
03:43Matt Maley, Chief Market Strategist at Miller Toback.
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