To The Moon

The market finally had a chance to breathe.

SK Hynix's US-listed shares surged 27% overnight, causing sleepless nights for its Hong Kong-listed 2x leveraged ETFs $CSOP SK Hynix Daily (2x) Leveraged Product(07709)$ .

Overnight, SK Hynix (ADR) $SK hynix(SKHY)$ shares in the US rose over 27%, closing at a premium of over 50% over its South Korean listed shares.

This surge also boosted a range of memory-related stocks. By the close, $SanDisk Corp.(SNDK)$ was up over 5%, $Micron Technology(MU)$ , $Intel(INTC)$ , and $NVIDIA(NVDA)$ were up over 4%, and $ASML Holding NV(ASML)$ and $Advanced Micro Devices(AMD)$ were up over 2%.

According to reports, a high-level coordination mechanism among the four major economic departments of the South Korean government will hold a meeting on Thursday to study countermeasures regarding the impact of leveraged ETFs on the stock market. This is the first time this issue has been formally discussed within the mechanism. This mechanism is the highest-level economic coordination platform involving the Ministry of Finance and Economy, the Financial Services Commission, the Bank of Korea, and the Financial Supervisory Service.

Investors are reminded that the Hong Kong-listed Southern $CSOP SK Hynix Daily (2x) Leveraged Product(07709)$ uses a synthetic simulation strategy, tracking SK Hynix's daily share price performance on the Seoul Stock Exchange through swap contracts. This means that the leverage in Hong Kong stocks is tied to SK Hynix (000660.KR), not the US stock market (SKHY.US).

South Korean retail investors bought approximately 400 billion won ($285 million) of SK Hynix ADRs on Nasdaq debut day (July 10), with nearly 100,000 investors participating through major securities firms. They held 1.36 million shares (0.76% of total issuance).

Domestically, retail investors also aggressively bought SK Hynix shares—net purchasing 788,510 shares worth ~1.7 trillion won on debut day, and continuing to accumulate even after a 16.15% price drop on July 13, bringing total holdings to ~3 trillion won.

SK Hynix chose to list on Nasdaq, one of its core purposes being to be included in core indices and attract passive capital inflows. However, index inclusion is not instantaneous, and investors need to understand the following key steps and timelines:

(1) Nasdaq Composite Index $NASDAQ(.IXIC)$ : Quickly Included

Since the inclusion threshold for the Nasdaq Composite Index is relatively low, as long as a company is listed on the Nasdaq exchange and meets basic liquidity and market capitalization requirements, it is eligible. Therefore, after listing on Nasdaq, SK Hynix was automatically included in the Nasdaq Composite Index and enjoyed the initial allocation of passive capital.

(2) $NASDAQ 100(NDX)$ : Waiting for ADR Market Capitalization to Meet Requirement

This is the most anticipated part of the market, but it should be noted that the inclusion rule for the Nasdaq 100 Index is based on ADR market capitalization, not the company's total market capitalization.

Since this IPO only released 2.5% of the total share capital, it can only be included in the index during the routine adjustment in December of this year, after the ADR's market capitalization reaches the index inclusion standard.

(3) $Philadelphia Semiconductor Index(SOX)$ : Expected in 2027

The Philadelphia Semiconductor Index requires listing for at least three months before inclusion. Since SK Hynix listed in July, it perfectly missed the Philadelphia Semiconductor Index's annual review window in September.

Therefore, to see a concentrated buying spree of passive funds in SOX, investors must patiently wait until September 2027.

Tuesday's market rebound was clearly influenced by three factors:

- South Korean stocks staged a V-shaped recovery, with Hynix shares initially falling nearly 10% before closing up 3.69%.

This indicates a return of institutional funds, pulling up the plummeting stock price. However, it will take two more days to confirm a return to an upward trend.

- CPI unexpectedly cooled, turning negative for the first time in six years. This significantly reduces the pressure for interest rate hikes this year.

- Trump announced the cessation of the 20% toll for merchant ships in the Straits, replacing it with investment from Gulf states in the US. Oil prices dipped slightly.

The market finally had a chance to breathe.

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