Hong Kong (AFP) – South Korean stocks suffered one of their steepest plunges Wednesday, with the blood-letting that has battered chip firms over the past month deepening as nervous investors unwound their bets on the AI boom. The tech sector came under assault as traders fret over the mesmerising sums being pumped into artificial intelligence, with investors questioning whether firms’ lofty expectations will be met. After a two-year rally that has seen several markets and companies around the world hit record highs, the air is blowing out, with chip firms bearing the brunt of the selling.
Seoul was again on the frontline, with the Kospi plunging more than 12 percent at one point to extend Tuesday’s near-11 percent collapse as chipmakers SK hynix and Samsung were hung out to dry. SK hynix was crushed, shedding almost 20 percent, having dived more than 14 percent on Tuesday — it has now lost more than 50 percent since hitting a record high a month ago. Samsung plunged more than 12 percent. The latest bout of selling of SK hynix came after its April-June operating profit and revenue came in below expectations, even as net profit soared a forecast-beating 1,242 percent. The firm is a specialist supplier of high-bandwidth memory chips to US industry behemoth Nvidia, and a pillar of South Korea’s tech-led economy.
Josh Gilbert, of eToro, said: “When you’re the dominant supplier of the high-bandwidth memory that powers Nvidia’s chips, the AI boom lands directly on your bottom line.” That means the market is unlikely to focus on the headline numbers alone. The bigger question is whether margins and guidance can justify its recent performance. Tokyo was also hit, diving around three percent as chip firm Kioxia plunged 13 percent, while Tokyo Electron was 12 percent off. Taipei gave up five percent with market heavyweight chipmaker TSMC four percent down.
But while Shanghai and Jakarta also fell, the rest of Asia enjoyed gains, with Hong Kong up more than one percent as its tech sector — which suffered a painful first half of the year — leading the way. Sydney, Singapore, Wellington, Manila and Mumbai were also up. Samsung is due to report earnings Thursday, while Kioxia and US titans Microsoft, Meta, Apple and Amazon are also set to announce.
Oil traders were also suffering as volatility returned to the crude market after US and Saudi warplanes carried out strikes Tuesday against Iran-backed militants in Iraq who launched more than two dozen drone attacks in recent days, the US military said. The strikes targeted “Iran-aligned terrorists that the Islamic Revolutionary Guard Corps (IRGC) directed to attack US forces and Saudi energy infrastructure,” US Central Command announced in a statement. CENTCOM had said earlier that Tehran launched multiple ballistic missiles in an “attempted surprise attack on US forces based in the Middle East”, but they were all intercepted. Iran on Wednesday said it had halted three oil tankers in the strait, through which a fifth of global crude and gas usually pass.
The strikes ended three days of calm after the US and Iran held off attacks, following almost two weeks of nightly US strikes on Iran, and repeated missile and drone salvos targeting Washington’s allies around the Gulf. Both main oil contracts rose more than four percent Wednesday. Brent has swung wildly this month — surging from around $72 at the start of July to more than $100 last week, before the three-day pause. The latest developments highlight the fragility of any efforts to find a lasting peace, even though US President Donald Trump this week said there was a “good chance” of a deal.
Wednesday also sees the Fed conclude its two-day meeting, and while most traders expect it to hold interest rates, there are concerns it could spring a surprise. Uncertainty has been fuelled by new boss Kevin Warsh’s refusal to publicly share his views on the economic outlook, part of his proposed reforms to reduce the amount of forward guidance the central bank offers. Investors remain on edge, even after recent data suggested inflation was easing, the jobs market was softening and oil prices have come down.
“Assuming the Fed leaves rates unchanged as expected, traders will be on the lookout for a potentially stronger description of inflation risks and/or possible wording to signal conditional tightening,” said Matt Weller at City Index. But he said “Warsh has expressed skepticism toward such forward-looking comments in the past.” Crucially, at least a couple of FOMC members are likely to favor an immediate interest rate increase, dissenting against the majority if necessary. “A third (or fourth) dissent in favour of hiking rates now would certainly represent a credible hawkish surprise and could boost the US dollar at the expense of risk assets.”
– Key figures around 0445 GMT –
Seoul – Kospi: DOWN 11.4 percent to 5,338.56
Tokyo – Nikkei 225: DOWN 2.3 percent at 60,945.73
Hong Kong – Hang Seng Index: UP 1.4 percent at 25,657.66 (break)
Shanghai – Composite: DOWN 0.5 percent at 3,793.18 (break)
West Texas Intermediate: UP 3.8 percent at $82.25 per barrel
Brent North Sea Crude: UP 3.9 percent at $87.34 per barrel
Dollar/yen: DOWN at 163.45 yen from 163.87 yen
Euro/dollar: UP at $1.1399 from $1.1386
Pound/dollar: UP at $1.3296 from $1.3286
Euro/pound: UP at 85.74 pence from 85.70 pence
New York – DOW: UP 1.0 percent at 52,747.32 (close)
London – FTSE 100: UP 0.8 percent at 10,871.02 (close)
© 2024 AFP
