00:00Charlotte, tell us more about this fund and why it's become so important, so central to the share price moves
00:04in the chipmaker SK Hynix.
00:09Yes, so this ETF called CISO SK Hynix Leverage Product, it was listed in Hong Kong in October.
00:15And in just a couple of months' time, it has grown so large and so fast.
00:19So it now has asset owner management of $13 billion, and that is largest of its kind globally.
00:26And so this product is built on one very simple promise, which is to provide two times the daily performance
00:32of SK Hynix.
00:33And to do that, they have to go through a rebalancing process every afternoon, which means they have to buy
00:39into the rallies and sell into the declines.
00:42And because of the size of the product, and also along with some smaller peers, products like that, they now,
00:48on volatile days, their rebalancing flows and the derivatives tied to it,
00:52they can account around 60% of SK Hynix turnover.
00:56So essentially, we got into a situation with this kind of like what traders call a tail wagging the dog.
01:02The SK Hynix shares are now being influenced by these derivatives and products built off it that was merely supposed
01:08to just track it.
01:11In terms of how extraordinary this is, have we seen anything like this before?
01:16This is just – the moves on a daily basis are extraordinary.
01:20Have we ever seen anything like this in terms of leveraged ETFs?
01:26Yeah, so while we're seeing leveraged ETF booming around the world, especially in the U.S., it is quite unique
01:33in terms of SK Hynix, in this case.
01:35Because the size of the product, the leveraged ETF, is very extreme compared to the size of SK Hynix and
01:42its turnover.
01:43And also, when we think about it, we have to consider the important role SK Hynix now plays.
01:48It accounts for nearly 30% on Korea's cost pay index.
01:53It is also playing such an important role central to the global AI trade this year.
01:58So what this means is if we see a big down day like we had last week, the kind of
02:03decline exacerbated by these mechanical flows from these ETF products is not just going to stay within SK Hynix.
02:10We're seeing that manifested in KOSPI and quickly filtering through the other Asian markets.
02:15And even with the pressure filling into the overnight U.S. session as well.
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