Asian stock markets experienced steep losses on Wednesday, extending a significant selloff. South Korea's KOSPI index plunged more than 8% earlier in the day, closing 6% lower at 5,663.24, marking its lowest level since early April and a 34% drop from its recent peak. This rout was largely fueled by a tumble in chipmakers, with SK Hynix shares falling over 10% earlier and 9% by close, despite reporting a sixfold increase in quarterly operating profit, as it missed lofty expectations. Samsung Electronics also saw a decline of more than 5%.
Japan's Nikkei 225 fell approximately 2%, with semiconductor and electronics stocks like Kioxia Holdings (down almost 8%) and Murata Manufacturing (down over 13%) under pressure. Taiwan's benchmark index dropped nearly 4%, with Taiwan Semiconductor Manufacturing (TSMC) and Foxconn both falling more than 2%. Chinese markets saw more moderate losses, with Hong Kong’s Hang Seng falling about 1.5% and both the Shanghai Composite and CSI 300 losing over 0.5%. The MSCI's broadest index of Asia-Pacific shares outside Japan was down over 2.45%.
Analysts attributed the selloff to investor anxiety regarding AI valuations and whether substantial capital expenditures in the sector will yield sufficient returns. Gary Tan, a portfolio manager at Allspring Global Investments, noted that "SK Hynix delivered strong results, but in today’s AI market, strong is no longer enough." Sean Teo, a sales trader at Saxo in Singapore, also pointed to investor wariness regarding "circular financing" in the AI sector, where organic demand becomes unclear. The negative cash flow reports from Alphabet and Tesla last week had already spooked investors.
Market attention is now focused on the Federal Reserve's policy decision later in the day. While rates are widely expected to remain unchanged, some analysts like Frank Flight, head of macro strategy at Citadel Securities, suggested a "hawkish shift" might lead to a rate hike, especially given moderate increases in energy prices. Investors are also keenly awaiting quarterly earnings reports from major tech companies like Microsoft and Meta Platforms for further insights into AI spending and overall market sentiment. Despite the broad downturn, Sony Group notably rose more than 3%.
