r/stocks
Korean markets triggered 2 circuit breakers this week, 1 after incredible MU earnings. Is this cause for concern?
Author fears extreme volatility and leverage crackdowns in South Korea could contagion to US markets despite strong MU earnings.
- MU's massive earnings beat indicates strong underlying demand in the memory chip sector.
- US stocks currently show no sense of panic despite the extreme volatility in Asian markets.
- Extreme volatility and potential leverage crackdowns in South Korea could lead to uncontrolled selling.
- Intense selling in Asia could have a contagion effect on American markets, especially given the close ties to the AI narrative.
Korean market volatility seems to have hit extreme levels this week. Markets first triggered circuit breakers on Monday night and then again Thursday night. The 2nd trigger was a bit surprising considering micron just delivered a massive earnings beat.
Experiencing 2 breakers in a week is already unusual. Triggering the 2nd one after a Micron earnings report that indicated Samsung and SK Hynix are thriving starts to concern me. It suggests the sell offs are not earnings related and that something else is going on behind the scenes.
I’ve seen a few slightly troubling reports come out of Korea this week. Law makers proposed taxes on unrealized gains and SK Hynix indicated a minor shift away from HBM production. But what concerns me the most is extreme Korean leverage and reports that lawmakers want to crackdown on the use of leverage. I’m wondering if both lawmakers and extreme market volatility will intensify fears among leveraged retail traders and lead to uncontrolled selling.
Additionally, the rest of Asian was also under water last night. Markets fell 2-4% across the board. Maybe there’s a greater macro phenomenon causing intense volatility in Asia that I’m not considering.
US stocks don’t seem to indicate any sense of panic so far. But I’m wondering if continued intense selling in Asia could have a contagion effect on American markets, especially because Korea’s top stocks are so closely tied to the AI narrative.
All my korean friends are gambling addicts and were heavily leveraged in memory stocks and it seems a relatively common thing to do with their friends as well. I imagine any sustained drop in share price is going to cause some insane panic whenever it happens so I'm not too surprised with the volatility. Personally, I've been buying leaps in the big names like Microsoft, Netflix, Meta, etc as I imagine that once the free money stops and there's hesitancy, a lot of money is going to rotate back to these big names that have been going on sale.
Yeah, my theory is that since these companies are spending so much, institutions are selling mega caps themselves, causing them to dip, to pump up the targets of their spending. Then once they are happy with the gains of SMH or DRAM, they sell off to top off the discounted mega caps. It's really dumb. I hold XLK and its obvious when it stays almost flat, the megacaps drop 10+%, and the SMH moonshot 200%. Broad index fund holders are being used as liquidity.
Jfc, koreans do love gambling and wasting money. They are massive p2w gamers too
I bought MU today on this dip. Monday it all should tank 20%, you are all welcome.
I also went all in on DRAM again today, and it tanked lmao
Those guys say no
According to my Korean friends, the Korean retail investors are taking massive loans to buy memory stock and since MU shot up, they sold all and pocket the profits
Korea market is now extremely leveraged and priced in a lot of growth, pullbacks are normal.
It’s a feature of their market. It happens all the time.
index dominated by 2 stocks that are very volatile, and the index has gone up 3 times since last year, so circuit breakers is very normal.
I'm Korean, and idk
Username checks out
Korea's market is literally more than 50% two stocks - SK Hunix and Samsung. Both are tied to the same specific sub-sector and are being heavily pumped by foreign speculators and leveraged domestic retail investors. Both think they're get rich quick schemes.
That's a recipe for massive volatility and concentration risk. Most of the people complaining about Korean circuit breakers are the same people who see no issues with an entire country's stock market almost tripling in under than a year.
However, all the hype has made people forget where their memory stocks' 'real' earnings are ultimately coming from - finite cashflows, debt and dilution from the Mag7, SpaceX, Oracle, OpenAI and Anthropic. Nobody has made the CapEx profitable yet, and as soon as one or more of them capitulates, its lights out for semis.
Y'all need to remember Samsung and SK Hynix is like 55% of the Korean stock market. It's very close to trading single stocks
They sell unbelievable volume of ads. Enough to dwarf the costs of all the dumb shit that their CEO does.
I won’t touch it either.