Asia Portfolio Strategy: Korea and Taiwan

Goldman Sachs remains overweight on Korea and Taiwan, citing strong tech fundamentals. However, the surge in leveraged ETF AUM and dealer gamma rebalancing creates mechanical volatility that requires active hedging.

Key Takeaways

• 1.Goldman maintains an Overweight stance on Korea and Taiwan due to strong tech fundamentals and valuations.
• 2.Dealer gamma rebalancing from leveraged ETFs creates mechanical, procyclical amplification of daily price moves.
• 3.System-wide margin stress is contained, but newer leveraged positions remain more vulnerable in higher-volatility environments.

Table of Contents

• Rising leveraged ETF exposure and dealer gamma rebalancing amplify end-of-day procyclical flows
• Rising options open interest and elevated implied volatility add to dealer gamma-hedging flows
• Margin balances reached record highs, but system-wide stress remains contained, while newer leveraged positions are more vulnerable
• Disclosure Appendix

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