Emerging-market stocks generally declined, mirroring a broader trend where risk appetite decreased and oil prices rose following the US President's statement that a ceasefire with Iran was over. This escalation in Middle East conflict contributed to a rotation out of AI beneficiaries, putting Asian stocks on the back foot.
In Seoul, shares plummeted over 6%, with the benchmark Korea Composite Stock Price Index (KOSPI) closing down 6.37% at 6,820.60 points. This occurred despite an earlier 6.24% surge in the index due to softer-than-expected US inflation data easing concerns about Federal Reserve rate hikes. The decline was attributed to escalating tensions in the Middle East and the Bank of Korea's decision to raise its benchmark interest rate by 0.25 percentage points to 2.75%, the first increase in 3.5 years, to combat inflation.
Technology stocks led the downturn, with market bellwether Samsung Electronics plunging 8.77% to 255,000 won and rival chipmaker SK Hynix tumbling 11.53% to 1,842,000 won. This specific slump was intensified by South Korean authorities curbing leveraged funds that track chipmakers, citing concerns over excessive volatility and retail investor losses. Institutional and foreign investors collectively sold a net 3.75 trillion won ($2.53 billion) worth of shares, while retail investors bought a net 3.66 trillion won. The Korean won strengthened against the U.S. dollar, trading at 1,480.4 won.
Elsewhere, the dollar saw gains earlier on renewed hostilities in the Gulf, where US and Iranian forces exchanged heavy missile and drone assaults. Oil prices, including Brent crude, rose significantly, with Brent futures up 3.5% to $78.65 a barrel, further signaling inflation risks. The dollar index, which tracks the currency against six peers, was last down 0.15% at 100.9. Inflation concerns were fueled by these events, despite earlier US data showing cooling producer and consumer inflation.
