Original source: BIT Brokerage
Last night's U.S. stock market can only be described as "violent rebound," and that seems somewhat conservative.
SK Hynix rose 17.52%, SanDisk rose 25.99%, Micron rose 18.36%, Microsoft rose 15.51%, and even the VIX fear index dropped 17.28% in a single day. Just a few days ago, the storage chip sector was bleeding heavily, and overnight it staged a stunning turnaround.
Such a level of rebound is never driven by a single factor. It is the result of the resonance of multiple forces including South Korea's market intervention, cooling U.S. inflation, Microsoft's earnings report, and a short squeeze. However, before getting excited, one question must be clarified: is this the start of a reversal, or a standard "dead cat bounce"?
1. South Korea's Market Intervention: Technical Assessment of Short Sale Ban, Sincerity Under Political Pressure
First, let's look at the first clue from the eye of this storm - South Korea.
After consecutive days of plummeting, the Korea Exchange (KRX) has internally assessed the technical feasibility and system preparation time for temporarily banning short selling, while also reviewing the feasibility of narrowing the current 30% daily price limit.
This market intervention carries political sensitivity. The South Korean government had previously encouraged retail investors to participate in the AI chip stock surge led by Samsung Electronics and SK Hynix, but now retail investors have suffered massive losses within 48 hours, putting the authorities in a dilemma - if they don't intervene, public sentiment cannot bear it; if they do intervene, they fear disrupting market pricing.
Because of this, the measures currently proposed seem quite sincere. The expectation of a short-selling ban combined with discussions to narrow the price fluctuations can significantly limit short-term selling pressure. For the market, this at least means one thing: the policy bottom has emerged ahead of the market bottom.
2. De-leveraging Enters Later Stage: Leverage ETF Sizes Evaporate by Nearly 70%
In yesterday's article, we mentioned that the key to the stabilization of the storage sector is not where the price drops to, but where the Korean leverage clears, and now it looks like we can see to what extent it has cleared.
The KOSPI index has repeatedly fallen below the 50-day, 100-day, and 200-day moving averages during this round of sharp decline, with a complete breakdown on the technical front. The asset size of leveraged ETFs has plummeted from a peak of over $50 billion in June to about $16 billion, a drop of nearly 70%.
This figure is crucial. Although it is hard to say that leverage has been completely cleared, a 70% reduction in leveraged funds indicates that the de-leveraging process has clearly entered the later stages - the most brutal peak of forced liquidations has likely passed, and the remaining selling pressure is more emotional than mechanical.
With South Korean policies providing support and the leverage clearout entering its final stages, this is the first reason why the rebound could ignite first in the Asian markets.
3. U.S. Resonance: Cooling Inflation + Microsoft's Strongest Single-Day Performance Ever
The second layer of reason comes from the United States.
The U.S. core PCE inflation for Q2 released last night showed cooling, leading to a sharp decrease in short-term interest rate hike expectations, with macro liquidity expectations turning loose overnight.
More significantly, Microsoft. Its fourth-quarter fiscal report for fiscal year 2026 was explosive: revenue of $90 billion, an 18% year-over-year increase; growth in Azure and other cloud services increased from 40% in the previous quarter to 43%; CEO Satya Nadella explicitly stated that Azure's annual revenue "exceeded $100 billion," up 41% - this is the first time this business has crossed the $100 billion threshold.
The market voted with its money: Microsoft surged over 15% in a single day, setting a record for the largest single-day market value increase for a single stock in Wall Street history, and the largest single-day gain for the stock in 18 years. Coupled with the end of selling pressure from the prior liquidation of large AI funds, tech stocks and momentum stocks collectively staged a short squeeze rebound.
Why is Microsoft's earnings report so important for the storage sector? Because the fundamental narrative behind the previous decline in storage chips was market concerns about "the AI bubble bursting" and unsustainable capital expenditures. Microsoft's earnings report essentially directly answers: demand has not only not slowed down but is accelerating. The narrative has been falsified, shorts have covered, and the gains are naturally exaggerated.
4. Calm Down: Potential Risks of Yen Interest Rate Hike
If what has been discussed so far makes you feel like "the bull is back," then I suggest you calm down for the next section.
Japan's inflation has accelerated for the second consecutive month, and the Bank of Japan is expected to raise interest rates again in the coming months. Data from the Ministry of Internal Affairs and Communications shows that Tokyo's core CPI increased by 1.9% year-over-year in July, higher than the market expectation of 1.8%; the "core-core CPI," excluding fresh food and energy, increased by 2%, and the overall CPI also rose by 2%. Chief Economist Takeshi Minami of the Agriculture, Forestry and Fisheries Credit Foundation predicts that inflation will remain above 2%.
Currently, the market widely expects the Bank of Japan to maintain interest rates at 1% during its meeting this Friday, but it may signal a continued interest rate hike.
What does this mean for the global market? It means that the cost side of the U.S.-Japan carry trade is increasing. The severe turmoil in the global market in August 2024 was triggered by large-scale liquidations of yen carry trades. If South Korean leverage clearing is the "obvious line" of this round, then the expectation of Japanese interest rate hikes is the "hidden line" hanging over our heads - it will not determine whether the rebound occurs, but it will determine how far the rebound can go.
5. What to Focus on Next?
Microsoft's earnings report answered the question of whether "AI capital expenditure can be sustained," but another question remains to be validated: can the high profits in the storage industry be maintained as the supply cycle progresses and China's Changxin Memory goes public?
To assess the quality of this rebound, we need to focus on the following matters:
Whether storage stocks can hold their gains, and whether Korean stocks avoid further decline;
Whether prices and orders for HBM, DRAM, and NAND can continue to be revised upward;
And three key time windows - the Future Storage Conference on August 4, SK Hynix's HBM4 release progress in Q3, and Nvidia's earnings report on August 26.
6. In Conclusion
To summarize the whole matter: the policy bottom has appeared, leverage clearout has entered its later stages, and the AI demand narrative has been reaffirmed by Microsoft. However, expectations of a Japanese interest rate hike have not yet materialized, and the storage supply cycle has not been verified, which means it is far from the time to shout "the bull is back."
For investors, two things are most taboo in this market: first is panic selling at the bottom, second is chasing highs during a violent rebound. What is truly useful is still discipline - do not go all in at the beginning of the rebound, wait for validation of signals to gradually position, replacing point forecasting with position management.
This is also the investment philosophy that BIT Brokerage has always emphasized. At this juncture, investors may also consider using BIT Brokerage's options feature to insure their target assets against the upcoming market movements, waiting for the market to provide answers.
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