SK hynix Posts Record Earnings Again on HBM4, Kioxia Gains

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1. SK hynix Q2 Operating Profit Tops 60 Trillion Won, Margin Hits Record 76%

- Key Summary: SK hynix rewrote its record quarterly earnings with second-quarter revenue of 79.3187 trillion won and operating profit of 60.5426 trillion won. With expanded demand for high-value memory driven by the artificial intelligence (AI) boom, plus gains from the sale of its Kioxia stake, pretax profit reached 122.7083 trillion won, more than double Samsung Electronics' (005930.KS) first-quarter results. Having signed long-term agreements (LTAs) with more than 10 Big Tech firms and started mass production of sixth-generation high-bandwidth memory (HBM4), its second-half earnings improvement is projected to accelerate further. Accordingly, some observers say this year's operating profit could exceed brokerage consensus and reach as much as 294.2440 trillion won.

2. 75% of KOSPI Below 1 PBR, Undervalued Stocks Surge in Correction

- Key Summary: Among KOSPI-listed companies, the proportion of stocks with a PBR below 1 reached 75%, the highest level this year. As funds concentrated in large semiconductor stocks, other sectors were sidelined in the rally despite strong earnings, and with the recent sharp market decline added on top, undervalued stocks increased rapidly. In fact, Hyundai Motor's PBR fell from 1.13 to 0.83 over a month, and most financial and securities stocks are trading below book value. However, some forecast that if the semiconductor decline halts and profit estimates hold, a rotation could spread across sectors.

3. Leverage 75% Liquidated, 56 Trillion Won in Losses Trapped in "Samjeonnix"

- Key Summary: Analysts said that leverage liquidation, cited as the main cause of the sharp domestic market decline, is proceeding slowly. JPMorgan assessed the liquidation rate for leveraged exchange-traded funds (ETFs) at 75%, while Citigroup Global Markets Securities put the liquidation rate for credit positions at 65%. As individuals engaged in additional buying even amid falling prices, leveraged ETF losses were estimated to reach 56.1924 trillion won. Meanwhile, outstanding margin loan balances and brokerage receivables bottomed out before turning back to an upward trend.

4. F4 Holds Emergency Meeting Only After 864 Trillion Won Vanishes

- Key Summary: The KOSPI plunged 33% over a month, triggering an unprecedented situation in which circuit breakers were activated on two consecutive days. Over two days, 864.5271 trillion won in market capitalization evaporated, and both foreign and individual investors engaged in large-scale net selling, producing a panic-selling pattern. As criticism mounted that the authorities' response was too late, the Ministry of Economy and Finance, the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service belatedly held a market situation review meeting (F4 meeting). The plunge was attributed to concerns over an AI peak-out and declines in semiconductor stocks stemming from disappointment over SK hynix's earnings.

5. SK hynix Signs Long-Term Deals with 10 Big Tech Firms; HBM4 Yield Stabilizes

- Key Summary: SK hynix enhanced its earnings stability by signing long-term supply agreements (LTAs) of up to five years with more than 10 customers, including Big Tech firms. It raised the yield of its sixth-generation high-bandwidth memory (HBM4) to the level of the previous generation and began mass production, and also signed a strategic partnership worth $500 billion with Nvidia. As a result, third-quarter revenue is projected to surpass 100 trillion won for the first time, and operating profit is expected to reach the 80 trillion won range. However, with Samsung Electronics starting HBM4 mass production and shipments and accelerating its pursuit, the competitive landscape is expected to intensify further.

6. AI-Driven Plunge Contagion Fears; UK Central Bank Probes SK hynix, TSMC Concentration

- Key Summary: The Prudential Regulation Authority (PRA), under the Bank of England (BOE), has begun examining the scale of global investment banks' holdings in Asian AI-related stocks. The move is seen as preparation for the possibility that an AI-driven market plunge could spread into a systemic financial market risk, as investment has concentrated in a small number of stocks such as SK hynix, TSMC and Changxin Memory Technologies (CXMT). In fact, SK hynix's share price fell more than 9% that day despite record quarterly earnings, while TSMC and Kioxia dropped 3.51% and 13.85%, respectively. Accordingly, the authorities are reportedly reviewing measures to require IBs to expand their holdings of liquid assets if necessary.