UBS Carroll AI Semis and Memory buying; EWZ and EEM upside; Gold buying

Macro Derivs Flow: AI Semis and Memory buying / EWZ and EEM upside / Gold buying

Macro and derivs trades over the last week:

• US equity flows surprisingly constructive ahead of CPI with regrossing back into AI trade vs selling of rates sensitive sectors (e.g. REITs, Biotech) as well as popular AI funders like Software and Financials. • Within AI, saw buying on Semis and Memory as well as Hyperscalers (ongoing for a few weeks now), PB desk sees positioning for the broader AI trade (such as Hyperscalers and AI adopters) now back to highs but positioning in Semis and Memory still well below previous peak. • Interestingly, there was also some massive call option buying across US semis spread across previous Friday and Monday, namely Jan expiry calls on SNDK, INTX, DRAM, BE, SKHY, AMD and CRWV mainly with a total premium spend of $250m. • Semis flow more mixed in Asia, buying of Taiwan large-cap Semis (led by TSMC) vs mixed Japan semis flow (buying memory, selling SPE) and outright Korea selling via futures. • Despite US cash flows being constructive, saw quite a bit of short-dated index hedging ahead of CPI but quickly unwound as soon as spot turned lower (some of it even before the print) e.g. saw $23bn SPX put spreads unwind starting on Thursday and saw $5bn of SPY put spreads bought ahead of print but unwound on Friday. • Still seeing Brazil upside via EWZ call spreads but with spot and vols higher, seeing a bit more call ratio and call condor structures compared to before, also worth noting that cash desk saw outright selling on EWZ early in the week so flows a bit more mixed now vs before (albeit still constructive). • China flows a bit more constructive, particularly on Internet with spot now trading quite low, cash desk was net buying HSTECH names, particularly Tencent, saw a bit of upside on KWEB too (e.g. Jan calls), interest in longer-

dated CSI structures also remains strong (been ongoing for many weeks now amid elevated outperformance rates). • EEM upside option buying also picked up this week (China being a big weighting), mostly outright calls on Jan expiry as vols are not particularly elevated. • Saw more dollar selling flows than would have expected ahead of CPI, continued to see USDJPY downside being bought, particularly at the start of the week and saw more interest in EUR topside trades (calls and call spreads targeting 1.20 in 2m or 3m). • Most notable non-Dollar selling flow was on CHF were HFs were unwinding shorts, particularly via EURCHF buying (continuation from previous week after stronger Swiss data) though worth noting that positioning is still net short CHF (has been a popular funding leg for a while). • Main rates move on the week was arguably in Europe with an aggressive repricing of ECB post Thurs meeting, exacerbated by decent amount of stops going through on Dec26 and Dec27 Euribor receiver positions as well stops in various fwd steepener structures (including long-dated 10s30s which moved 9bps). • Despite broadly higher rates and Oil, interesting to see Gold still bid (albeit more on ETF side) with buying of Gold Miners returning vs previous week via GDX outright buying while retail were especially active buying GLD with Thursday seeing the fourth largest buying-day ever.