The leveraged ETF, Southern 2x Long SK Hynix (07709), experienced a sharp decline of over 16%, trading at 35.6 Hong Kong dollars as of press time, with a turnover of 6.305 billion Hong Kong dollars.

On the news front, UBS released a research report indicating it has revised down its third-quarter operating profit forecast for SK hynix to 86 trillion Korean won, slightly above market consensus. This adjustment is based on the assumption of a higher long-term supply agreement (LTA) coverage ratio, with DRAM average selling prices (ASP) projected to rise 19% quarter-on-quarter (previously 21%), while NAND ASP is expected to remain unchanged at a 25% sequential increase.

The bank also lowered its operating profit forecasts for 2027 and 2028 to 505 trillion and 544 trillion Korean won, respectively, representing reductions of 19% and 18%. However, it anticipates free cash flow will reach 188 trillion, 320 trillion, and 374 trillion Korean won for the years 2026 through 2028.

Additionally, UBS cut its target price for SK hynix from 3.2 million Korean won to 3.0 million Korean won. The report notes that SK hynix has been revising its long-term supply agreements (LTAs) faster than expected, having signed 10 so far, with more under negotiation. It is understood that the signing clients include major U.S. hyperscale cloud service providers and large-scale OEM manufacturers.

UBS believes that while these LTAs may limit short-term average selling price upside, they will benefit profit margins and return on investment over the long term. Regarding High Bandwidth Memory (HBM), negotiations for the years 2027 and beyond have already progressed. The main risk remains memory affordability.