The benchmark Kospi plunged 551 points, or 8.1%, to 6,2505. The steep decline triggered “sidecar” trading curbs on both the Kospi and the junior Kosdaq index, temporarily halting programme trading.
Memory-chip maker SK Hynix dropped 11% after its American depositary receipts (ADRs) in New York fell to a record low and slipped below their initial US offering price. Samsung Electronics, another heavyweight in the index, declined 9.15%. Together, SK Hynix and Samsung Electronics account for more than half of the KOSPI’s weighting, amplifying the impact of the semiconductor sell-off on the broader market.
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1. AI spending worries
Fresh concerns over the scale of artificial intelligence spending added to the pressure on semiconductor stocks even as falling oil prices further after potential talks between US and Iran. The central question for investors is whether companies pouring billions of dollars into artificial intelligence will be able to generate enough returns to justify the spending. Chip stocks remained under pressure in the US as well, with the Philadelphia Semiconductor Index extending its decline for a third consecutive session.
2. China’s new threat
Developments in China added to investor concerns. ChangXin Memory Technologies (CXMT) made a blockbuster market debut, soaring nearly 500%, while reports emerged that a Chinese state-backed company had started producing immersion DUV lithography equipment.”The market’s concern lies less in CXMT’s current earnings and more in its potential for accelerated capacity expansion to rival Korean companies and technology development following its IPO,” Kim Seok-hwan, a Seoul-based market analyst at Mirae Asset Securities, told Reuters.The broader MSCI Asia Pacific Index fell 2.92%, with technology stocks bearing the brunt of the losses. The Kospi dropped 7.89%, while Japan’s Nikkei declined 3.86%% and the Topix fell 2.77%.
3. US Fed commentary
Investors are also facing a packed week, with interest rate decisions due from the US Federal Reserve, the Bank of Japan and the Bank of England, alongside earnings reports from major technology companies.
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The US Federal Reserve will begin its two-day policy meeting on Tuesday and is widely expected to leave interest rates unchanged on Wednesday.
However, expectations for a rate hike of at least 25 basis points have risen to 36.3%, from 16% a week ago, according to CME FedWatch. Markets are now pricing in an 81% probability of a rate hike at the central bank’s September meeting.
4. Weak global cues
US stock futures also edged lower in early Asian trading on Tuesday as investors braced for a busy week of megacap earnings and awaited the Federal Reserve’s rate decision. S&P 500 futures fell 0.3%, while Nasdaq 100 futures declined 0.2%. Dow futures gained 24 points, or 0.05%.
The moves came after a mixed session on Wall Street. The 30-stock Dow climbed more than 260 points, or around 0.5%, while the S&P 500 posted a modest gain as oil prices retreated following a pause in fighting in the Middle East.
The Nasdaq Composite, however, slipped 0.2% as a sell-off in semiconductor stocks weighed on the tech-heavy index.
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