Global equities, especially in Asia, experienced a downturn with the Kospi Index slumping 6% ahead of a market holiday, primarily due to a sell-off in semiconductor stocks. This decline was led by major chipmakers like SK Hynix Inc. and Samsung Electronics Co., reflecting investor skepticism about the sustainability of the artificial intelligence rally and concerns over lofty valuations in the chip sector after significant gains earlier in the year. The broader MSCI Asia Pacific equities gauge also fell by 1.2%, with a 3% drop in Japan's Nikkei 225 Stock Average.
Adding to market volatility, oil prices fluctuated as the US launched new airstrikes on Iran, escalating tensions in the Middle East. Brent crude initially rose on these geopolitical developments but later reversed gains, falling 0.4% to $84.64 a barrel. Gold prices also fell 0.8% to $4,026.50 an ounce. This geopolitical risk contributed to a mixed currency market, with the Bloomberg Dollar Spot Index remaining largely unchanged despite softer-than-expected US inflation data earlier in the week, which was expected to ease pressure on the Federal Reserve regarding interest rate hikes.
The market mood was further impacted by the Bank of Korea's decision to raise its benchmark interest rate by a quarter percentage point to 2.75%, the first increase in 3.5 years, in an effort to curb inflation exacerbated by Mideast tensions. Despite the current market correction, analysts like Suresh Tantia of UBS Global Wealth Management remain bullish on the Korean equity market, viewing the current sell-off as a "mid-cycle digestion" after a substantial rally. Institutional and foreign investors were net sellers of shares in Seoul, offloading $1.6 billion and $1.38 billion worth respectively, while retail investors bought $3.66 billion.
