A leveraged inverse ETF tracking the Nikkei index surged more than 7% in Hong Kong trading. Southern 2x Inverse Nikkei (07515) was last trading 7.69% higher at HKD 15.13, with turnover reaching HKD 11.87 million.

The sharp move came as Japanese and South Korean stock markets opened lower and extended losses, driven by concerns over a major NVIDIA AI supply agreement and intensifying competitive pressures. The Nikkei 225 index fell more than 4% during the session, hitting its lowest level since May 22. Japan's memory chip leader Kioxia saw its shares plunge over 18% by the close.

Nomura analysts noted that following reports about a significant NVIDIA investment deal, credit risk for the involved parties has increased, which investors are interpreting as a negative signal. Adding to the headwinds, China's advancements in semiconductor manufacturing equipment are posing a threat to Japanese suppliers, who have long held a competitive advantage in that sector.

Goldman Sachs Japan equity strategist Bruce Kirk warned that the macro environment for the yen is fundamentally different from two years ago, with the conditions for a rapid yen appreciation being significantly weaker. However, he pointed out that positioning in Japanese stocks is now extremely crowded. Foreign net buying, hedge fund allocation levels, and retail margin borrowing have all surpassed or are significantly higher than their July 2024 peaks. While the probability of a sudden currency crash has decreased, Kirk cautioned that the Japanese stock market's vulnerability to unexpected shocks—whether from a shift in the AI narrative or geopolitical events—is actually greater now than it was two years ago.