The synchronized selloff across Tokyo and Seoul underscores how tightly linked regional chip stocks have become, with analysts pointing to supply-demand dynamics, including elevated margin buying and leveraged ETF flows, as much as underlying fundamentals. Attention now shifts to TSMC’s earnings later in the day, seen as a key read on whether AI-driven demand can offset the volatility hitting chip-adjacent names. In Korea, the central bank’s rate hike adds a further layer for markets to digest, with the won steadying but chip heavyweights still under heavy pressure even as the currency move was aimed at supporting it.
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Chip stocks led a sharp selloff across Japan and South Korea, with the Kospi triggering a sidecar even as the Bank of Korea delivered its long-awaited rate hike.
Summary:
- Japan’s Nikkei fell around 3%, with the broader Topix also lower, as chip-related shares underwent a sharp correction
- Memory chipmaker Kioxia led Nikkei losses, down roughly 15%, with SoftBank Group and Advantest also falling sharply
- Markets awaited earnings from Taiwan’s TSMC, expected to post a fifth straight quarter of record profit after a roughly 60% jump in net profit last quarter
- South Korea’s Kospi slid around 7%, triggering a sidecar trading curb, with SK Hynix and Samsung Electronics both down heavily
- The Bank of Korea hiked its policy rate 25bp to 2.75%, its first increase in over three years, aimed partly at supporting the won
- Analysts linked the region’s tech volatility partly to supply-demand factors, including South Korea’s leveraged ETF-related selling and elevated margin buying among Japanese retail investors
Chip-related stocks led a sharp selloff across Japan and South Korea on Thursday, with Japan’s Nikkei falling around 3% and South Korea’s Kospi sliding roughly 7% and triggering a sidecar trading curb. The Nikkei’s decline was led by memory chipmaker Kioxia, which dropped around 15%, its steepest fall since last November, while SoftBank Group and chip-testing equipment maker Advantest also posted sharp losses.
Analysts said there has been a noticeable divergence between semiconductor stocks and the broader market recently, with high-tech shares undergoing a correction. Today’s volatility looked more supply-demand driven than fundamentals driven, pointing to South Korea’s leveraged ETF-linked selling and elevated margin buying among Japanese retail investors in recent weeks. Markets were awaiting an earnings call from Taiwan Semiconductor Manufacturing later in the day, with the world’s largest advanced AI chipmaker expected to post a fifth consecutive quarter of record profit after a roughly 60% surge in net profit last quarter.
In South Korea, the Kospi’s slide of around 7% more than erased the previous session’s gains and triggered a sidecar, temporarily halting program trading. SK Hynix tumbled as much as roughly 12%, while Samsung Electronics fell around 9%, with the two chipmakers together making up just over half of the Kospi’s weighting. Battery maker LG Energy Solution was a rare gainer, edging higher. KOSDAQ slid alaos, triggering its own sidecar prgram trading suspension.
The declines came as the Bank of Korea’s monetary policy board voted to raise its policy rate by 25 basis points to 2.75%, its first hike in more than three years, aimed at shoring up the won after the currency weakened roughly 3% against the dollar this year. The move, expected by nearly all economists surveyed by Reuters beforehand, brings the BOK’s stance closer in line with the Bank of Japan, which recently raised its own benchmark rate to a 31-year high. The rate decision came alongside separate news that South Korea’s financial regulator plans to introduce new measures shortly on single-stock leveraged ETFs, products increasingly blamed for amplifying the market’s recent volatility.
This article was written by Eamonn Sheridan at investinglive.com.