The tech stock selloff spilled over from Wall Street into the Asia-Pacific region, driving capital into bonds and safe-haven currencies, while expectations for a Federal Reserve rate hike also tumbled sharply.
Asia-Pacific equities broadly fell on Friday, with the MSCI Asia-Pacific Index dropping 1% and on track for a fourth consecutive weekly loss. South Korea's KOSPI led the decline, plunging more than 4% at one point during the session, while Japan's Nikkei 225 also fell nearly 2%.
Asian bond markets strengthened in tandem with overnight U.S. Treasuries. Japan's 10-year government bond yield fell 10 basis points to 2.78%, the 5-year yield dropped 10 basis points to 2.19%, and Australia's 10-year government bond yield declined 10 basis points to 5.164%.
In currency markets, safe-haven currencies the Japanese yen and Swiss franc strengthened. The U.S. dollar fell 0.2% against the yen to 156.44, down nearly 1% for the week; the dollar dropped 0.1% against the franc to 0.8196, a near one-month low. Gold failed to benefit from safe-haven sentiment, briefly falling below the $4,000 per ounce mark with an intraday loss of 0.7%. Silver declined even more sharply, with spot silver dropping as much as 2% during the session.
Oil prices bucked the trend, with Brent crude climbing to a five-month high of $114 per barrel as tensions in the Middle East continued to heighten concerns over energy supply disruptions.
South Korea Leads Asia-Pacific Decline, SK hynix Under Multiple Pressures
South Korea became the worst-performing major market in the Asia-Pacific region.
South Korea's KOSPI plunged more than 4% at one point on Friday before narrowing losses, but its month-to-date decline in October has exceeded 21%, making it one of the worst-performing major stock markets globally this month.
Both Samsung Electronics and SK hynix fell more than 4% at one point. Losses later narrowed, with SK hynix turning positive while Samsung Electronics remained down more than 2%.
SK hynix announced it was suspending its evaluation of a U.S. listing plan for its American subsidiary Solidigm, citing intensified financial market volatility, a broad correction in semiconductor stocks, and the need to reassess whether an IPO would serve the interests of existing shareholders.
South Korea's Financial Supervisory Service also expressed concerns about whether Solidigm's U.S. listing would violate the country's dual-listing rules. FSS Governor Lee Chan-jin said regulators are reviewing the matter. SK hynix emphasized that its investment demand for Solidigm remains unchanged and that it will continue exploring alternative financing channels.
Additionally, according to data from the Korea Financial Investment Association as of October 21, brokerage account investor deposits have fallen below 90 trillion won (approximately $67.9 billion), the first time since January this year. Foreign investors led the selloff, net selling $13 billion in KOSPI stocks in October, concentrated in the technology sector.
Roy Lim, an equity sales trader at Samsung Securities, also noted that as brokerage deposits decline, retail investors' ability to support the market will be limited.
Jung In Yun, CEO of Fibonacci Asset Management, said:
Investors are increasingly questioning whether massive AI spending can quickly translate into sustainable cash flow, while rising oil prices add further uncertainty. Market sentiment is fragile, and investors are prioritizing capital preservation over buying the dip.
Japan's Inflation Exceeds Expectations, Adding Uncertainty to Rate Hike Path
Japanese electronic components and financial stocks both sold off, with the semiconductor supply chain declining.
The Nikkei 225 opened lower on Friday, falling more than 2% at one point. Consumer electronics and semiconductor supply chain stocks broadly declined, with downstream electronic components giant Taiyo Yuden plunging 7.60%, Murata Manufacturing tumbling 6.48%, and smartphone and electronic parts maker TDK dropping 7.30%.
Upstream materials company Mitsui Mining & Smelting fell 7.81% to lead declines, semiconductor silicon wafer maker SUMCO plunged 7.73%, and chip dicing equipment monopoly DISCO also dropped 6.34%, reflecting concentrated selling across the entire electronic hardware manufacturing sector.
Banking and financial stocks experienced broad adjustments, with major commercial bank Resona Holdings falling 7.24% in a single day, while regional banks Chiba Bank and Yokohama Financial Group plunged 6.24% and 6.16% respectively.
Data showed Japan's September core CPI rose 2.1% year-on-year, the highest this year, up from 1.7% in August and matching the median forecast of economists surveyed by Reuters. Core CPI excluding fresh food and energy rose 2.4% year-on-year, breaking above 2% for the first time since March this year and exceeding the Bank of Japan's inflation target.
Elon Gu, senior analyst at Ultima Markets, believes that since the market widely expects the late-October meeting to keep rates unchanged and a rate hike to come in December, short-term funds chose to take concentrated profits after the inflation data was released, dragging down Japanese banking stocks collectively. Rising risk aversion pressured long-end government bond yields, and combined with concerns about higher financing costs for real economy enterprises, this jointly dampened expectations for bank stock margin expansion.
Abhijit Surya, senior Asia-Pacific economist at Capital Economics, noted that the acceleration is noteworthy, "especially given that it occurred against the backdrop of a significant slowdown in fresh food inflation and continued energy deflation." He also pointed out that although rice prices fell 20.6% year-on-year, this sharp decline still failed to prevent overall goods inflation from rising to 2.8%, up from 2.6% in August.
Japan's Economic and Fiscal Policy Minister Minoru Kiuchi said Friday that the government's decision on whether to formally declare an end to deflation will be made after comprehensively considering CPI, GDP deflator, and underlying factors behind potential inflation, stating that "the conditions for the government to formally declare an end to deflation are not yet mature."
He also expressed hope that the Bank of Japan will appropriately guide monetary policy in accordance with the joint statement reached with the government.
Safe-Haven Currencies Strengthen, Gold and Silver Under Pressure
In currency markets, safe-haven assets showed clear divergence. The yen and franc strengthened as market sentiment shifted.
The U.S. dollar fell 0.2% against the yen to 156.44 on Friday, following a 0.9% overnight decline; the dollar also slipped 0.1% against the franc to 0.8196, touching a near one-month low, after an overnight drop of 0.5%.
Gold failed to benefit from safe-haven sentiment, with spot gold briefly falling below the $4,000 per ounce mark and an intraday loss of 0.7%. Silver declined even more sharply, with spot silver falling as much as 2% during the session to $53.51 per ounce.
Oil prices diverged from safe-haven assets, continuing to rise. Brent crude futures climbed to $114 per barrel, the highest in five months, while WTI also rose more than 1%. Houthi attacks on Saudi Arabia intensified market concerns over escalating Middle East conflicts and further energy supply disruptions.
Comments