Asian-Pacific markets closed mixed but predominantly lower on Tuesday, primarily driven by renewed pressure on semiconductor stocks. This occurred ahead of a busy week featuring major tech earnings reports and the Federal Reserve's upcoming rate decision. The weakness in chip companies also impacted Asian markets following reports that China's Shanghai Yuliangsheng began mass production of chipmaking technology previously dominated by a Dutch firm.
Countries like South Korea faced significant downturns, with the Kospi plunging nearly 11% and triggering a circuit breaker, while the Kospi 100 fell 11.63% to 7,389.89. Japan's Nikkei 225 tumbled 3.95% to 62,364.92, and the Topix fell 2.52% to 3,963.59. Major chip manufacturers in these regions saw substantial declines, with SK hynix sinking 14.7% and Samsung over 13% in Seoul, and Kioxia Holdings plunging 18.33% and Lasertec losing 14.05% in Tokyo. Taiwan's market also dropped over 4% due to a hit on TSMC.
Despite the chip sell-off, falling oil prices provided some relief. Brent crude sank 5% to $84.09 a barrel, easing inflation worries and contributing to a decline in bond yields before the Federal Reserve meeting. Wall Street, while experiencing weakness in chip shares, saw its S&P 500 and Dow Jones Industrial Average advance, buoyed by solid earnings from companies like Boeing and Coca-Cola, and the retreat of oil prices. The Nasdaq 100, though deeply negative earlier, cut losses to finish down just 0.2%.
Analysts noted that while lower oil prices should typically be risk-positive, the heavy impact from chip stocks kept overall index sentiment fragile. Markets are questioning the sustainability and competitive landscape of the AI capital expenditure boom, moving from a perception of "AI spending is good" to scrutinizing whether it earns its cost of capital. The Federal Reserve is widely expected to keep rates unchanged at 3.50-3.75% for the fifth consecutive meeting, though bets on a rate hike have been increasing.
