SK hynix Weighs First U.S. Memory Production With Intel

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1. Reuters: SK hynix Weighs U.S. Memory Production; Intel Calls It "Speculation"

- Key summary: SK hynix is in talks with Intel over producing memory chips directly in the United States for the first time, according to reports. Reuters, citing multiple sources, reported on the 16th that the options under discussion include leasing part of a production facility Intel has been building in Ohio and setting up a joint venture with customers such as major cloud companies. U.S. Commerce Secretary Howard Lutnick said on the 2nd that companies producing in the U.S. would not face tariffs. SK hynix is investing about $4 billion (about 5.46 trillion won) to build a next-generation high-bandwidth memory (HBM) advanced packaging plant in West Lafayette, Indiana, with mass production targeted for the second half of 2029. SK hynix said nothing has been decided, and Intel called the report "speculation" without offering detailed comment. The Ministry of Trade, Industry and Energy said the matter could be subject to review under the Industrial Technology Protection Act if it involves national core technology.

2. Bessent, Who Said He Held the Cards, Draws Fire for Blaming Others as Yields Stay High

- Key summary: U.S. Treasury Secretary Scott Bessent said on the 15th that the recent rise in Treasury yields stemmed from global issues, a diagnosis at odds with his earlier explanations. In an interview on the 30th of last month, he rejected the idea that rising yields should be read as distrust of U.S. finances, and at a Group of 20 finance ministers' meeting on the 1st of this month he argued it was a story about growth. At a House Financial Services Committee hearing that day, however, he said the rise in the 10-year yield reflected the need to address the fiscal deficit. The market points to higher oil prices from the war in Iran, expectations of a rate increase by the Federal Reserve, competition for funding amid expanding AI investment, and U.S. national debt that has passed $40 trillion as drivers of higher long-term yields. The 10-year yield briefly topped 5.04% that day, the highest level since 2007. Financial Times columnist Edward Luce wrote that the bond market bet against Bessent and that he ultimately lost, asking pointedly whether traders would put any weight on his next remarks.

3. Money Flowing Into AI Bonds Shakes Demand for U.S. Treasuries

- Key summary: Analysts say Big Tech companies needing funds for AI infrastructure are absorbing investment money at high yields in the U.S. ultra-long bond market, fueling the rise in Treasury yields. According to the London Stock Exchange Group (LSEG), issuance of U.S. Treasuries with maturities of more than 20 years totaled $229.6 billion in the January-August period, down 26% from a year earlier. Issuance of dollar-denominated investment-grade corporate bonds, by contrast, rose 78% to $263.7 billion. Corporate bond issuance by technology companies swelled to $61.1 billion from $16 billion in 2024, lifting the sector's share to 24.1% from 6.1%. Alphabet, Google's parent, followed its first yen-denominated corporate bond in May of this year with bonds denominated in euros, Swiss francs and Canadian dollars, and in February issued a 100-year sterling bond. Masahiro Koide, an executive officer at Mizuho Securities, said continued corporate bond issuance by AI and technology companies in the ultra-long segment could spill over into higher U.S. long-term yields. The 30-year Treasury yield has moved in the 5.3% range this month, the highest level since 2007.

4. [Investment Window] Raising Cash but Still Risk-On

- Key summary: According to the State Street Risk Appetite Index, institutional investors' appetite for risk recovered in August from a subdued level in July, staying in positive territory for a fifth straight month. The most notable shift in asset allocation was a move from bonds into cash, the result of concerns over inflation, fiscal policy and a rising term premium that weakened sentiment toward bonds. At the end of August, equity holdings were 32.5 percentage points higher than bond holdings, far above the long-term average of 20 percentage points. Flows were selective, concentrating in the information technology sector toward the end of August while selling was seen across most other sectors. By region, flows were solid in both the U.S. and emerging markets, with money within emerging markets gravitating to Korea and Taiwan, where technology stocks account for a large share. Price pressures also built as Middle East concerns pushed oil 20% above early-July levels. The won strengthened on semiconductor exports, inflows into Korean equities and a solid current account surplus, though State Street has maintained a strategic underweight position on the currency.

5. [Exclusive] Board Nomination Rights Require More Than 10% of Westinghouse; KEPCO to Bear the Cost

- Key summary: The U.S. side has told Korea that the cost of acquiring a Westinghouse stake is separate from the $200 billion cap on investment funds earmarked for the U.S., leaving Korea Electric Power Corp. or Korea Hydro & Nuclear Power to raise the money on their own. Views in the nuclear industry lean toward the position that a stake of at least 10% is needed for the investment to be meaningful. Westinghouse shareholders lose board nomination rights if their stake falls below 10%, and the threshold for taking part in core management decisions such as nuclear plant orders or the sale of business rights is 25%. Korea's strategy is to secure at least a 10% stake to open a path to management participation and then resolve intellectual property issues, while the U.S. is positioned to block Korean involvement as much as possible in nuclear power, a strategic industry. Valuing Westinghouse at $30 billion (about 41 trillion won), acquiring even 10% would require 4.1 trillion won in cash. The government has pushed back its schedule for reporting to the National Assembly on U.S. investment from the 17th to the 22nd, and the signing of an agreement is expected to be delayed as well.

6. Turnover Hits Year's Low as Sentiment Cools; Foreigners Dump 12 Trillion Won

- Key summary: Foreign investors, who drove the KOSPI back above the 7,000 mark early this month, have turned to selling Korea, unloading a net 11.9462 trillion won over six consecutive sessions since the 9th. The KOSPI closed at 6,717.97 on the 16th, up 1.37% from the previous session, but average daily turnover fell to 20.968 trillion won, the lowest so far this year and less than half the 50.347 trillion won recorded in June. Samsung Electronics (005930) at 6.2945 trillion won and SK hynix at 4.8775 trillion won accounted for 93.52% of foreign net selling. Over the same period, foreigners bought a net 7.4199 trillion won worth of shares including SK Innovation (096770), GS (078930), Korean Air (003490), Hyundai Mobis (012330) and Woori Financial Group (316140), rotating into other sectors. Kim Tae-hong, chief executive of Growth Hill Asset Management, said the won-dollar exchange rate's plunge from the 1,550 range to the low 1,300s gave foreigners a chance to lock in currency gains on top of share-price gains. Shin Joong-ho, head of the research center at LS Securities (078020), said the U.S. 10-year Treasury yield rising above 5% has raised the required return hurdle for risk assets.