U.S. Yields Hit 23-Year High Yet Tech Stocks Rally: Why?

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and delivers six tailored news items for each reader type.

1. Rates and Stocks Rise Together: How AI Rewrote the Investment Playbook

- Key points: The 10-year U.S. Treasury yield rose as high as 5.347% in intraday trading on the 5th, its highest level since 2002, while the Nasdaq closed at a record 27,477.31 the same day. Normally, rising Treasury yields increase the appeal of safe assets and lower the present value of future earnings, weighing on technology stocks. When the 10-year yield topped 5% in October 2023, the Standard & Poor's 500 and the Nasdaq each corrected by more than 10%, and the KOSPI fell 5.7%. Lee Jin-woo, head of the research center at Meritz Securities, said the recent rise in rates includes growth as a variable, and that as long as the export cycle holds, rates and share prices should be expected to move together in South Korea as well.

2. Why Is Nvidia Carrying Out Its Largest-Ever Share Buyback?

- Key points: Nvidia's remaining buyback authorization stands at $235 billion, which it plans to execute through January 2028, an increase coming just four months after it added $80 billion. Even if the full authorization is used, the boost to earnings per share would be only about 2% to 3%, but return on equity is expected to rise from 71% to around 80%. Apple, widely cited as the textbook case, returned virtually all of its profits to shareholders for more than a decade after 2013, during which its share count fell about 40% and shareholders' stakes grew 1.6-fold. One caveat is that accounts receivable from chips delivered to customers but not yet paid for rose to $63.1 billion from $38.5 billion in just six months, suggesting that the pace at which those receivables convert into cash will ultimately determine the pace of shareholder returns.

3. Materials, Biotech and Battery Shares Surge as Trading Values Recover

- Key points: The KOSDAQ index closed at 919.92 on the 6th, up 2.98%, or 26.63 points, from the previous session, rising above the 900 line for the first time in three months since July 1 this year. Since the 1st of last month, SFA Semicon has soared 100.17%, and the average gain across seven back-end chip packaging stocks reached 54.86%, with secondary battery and biotech names such as EcoPro BM (247540) and HLB (028300) joining the advance. Average daily trading value also increased to 8.798 trillion won in October from 5.9868 trillion won in August. Foreign investors, who sold a net 1.4733 trillion won worth of shares last month, turned to net purchases of 170.3 billion won this month. Baek Young-chan, head of the research center at Sangsangin Securities (001290), said it is still too early to say the KOSDAQ market has improved structurally, adding that the market has yet to benefit from shareholder return and capital market advancement policies and warrants further observation.

4. Gulf States Turn to Shuttle Oil Exports as Hormuz Volumes Partly Recover

- Key points: Gulf oil producers including Saudi Arabia are sustaining exports through ship-to-ship transfers, loading crude onto very large crude carriers at ports inside the strait and transferring it to vessels outside. According to the United Kingdom Maritime Trade Operations and other sources, seven vessels have come under attack near the strait since the 28th of last month. Still, based on Kpler data, the seven-day average of crude exports as of the 30th of last month stood at 18.3 million barrels a day, exceeding the 18 million barrels recorded before the war began. Brent crude for December delivery settled 1.89% lower at $100.32 a barrel, while West Texas Intermediate for November delivery fell 1.84% to $89.43 a barrel. Meanwhile, as fighting between the Saudi-led coalition and Houthi rebels widens in the Red Sea, the Strait of Hormuz is expected to grow even more congested for the time being.

5. Volatility Interruption Triggers Jump 34% for Individual Stocks as Trading Hours Extend

- Key points: According to the Korea Exchange, volatility interruption triggers for individual stocks totaled 13,236 last month, up 33.8% from August, while triggers for exchange-traded products fell 67.1% to 533 from 1,622. The increase for individual stocks reflects the exchange's launch on the 14th of last month of an after-market session running from 4 p.m. to 8 p.m., which applies the same thresholds as the regular session even during thinly traded hours. On the first day, the after-market session alone saw 1,112 triggers, about 2.8 times the 391 recorded in the regular session that day. By contrast, triggers for single-stock leveraged and inverse products based on Samsung Electronics (005930) and SK hynix (000660) plunged 93.5% in two months to 55 in September from 843 in July, following an increase in minimum deposit requirements and the introduction of mandatory mock trading.

6. 'Burn Preferred and Common Shares Together': Life Asset Management Counters Samsung Electronics

- Key points: Activist fund Life Asset Management said in a statement on the 6th that the core of its proposal is not preferential treatment for preferred shares but making share buybacks and cancellations a reality, adding that it would actively welcome it if Samsung Electronics cancelled common and preferred shares together. Samsung Electronics has been reluctant to cancel common shares because financial affiliates such as Samsung Life Insurance may hold a combined stake of only up to 10% under the Act on the Structural Improvement of the Financial Industry. Preferred shares, which carry no voting rights, can be cancelled without affecting the controlling shareholders' grip or running afoul of that law. Life Asset Management rebutted claims of unfairness by citing the precedent of 2015, when Samsung Electronics filled about 35% of its first-round buyback with preferred shares after they traded 22% below common shares. The company's current 15 trillion won buyback program is nearing full execution, and even after a third-quarter special dividend, remaining year-end distributable resources are estimated at 55 trillion to 75 trillion won, focusing market expectations on an additional shareholder return decision by the board in late October.