Asian stocks slumped on Wednesday as a renewed semiconductor selloff hit South Korea and Japan. Elevated bond yields and persistent Middle East tensions also kept investors cautious toward growth stocks.
The MSCI AC Asia Pacific equity gauge fell about 2%. Meanwhile, Nasdaq 100 Futures slipped 0.2%, and S&P 500 Futures lost 0.1% after Wall Street’s technology-led selloff.
The Philadelphia Semiconductor Index plunged 5.6% overnight, marking its biggest one-day decline since late July. Micron Technology fell 7%, while Nvidia lost 2.3%.
Summary
Asian equity markets came under heavy selling pressure as weakness in semiconductor stocks spread across the region.
South Korea’s KOSPI suffered the sharpest decline, falling 5.5%, while Japanese and Chinese markets also moved lower. Higher U.S. Treasury yields added pressure to expensive technology shares.
Investors are also watching the Federal Reserve, persistent Middle East tensions and oil prices. At the same time, signs are emerging that institutional investors are becoming more selective about AI-related exposure.
High bond yields add pressure to technology stocks
The pressure is spreading beyond chips. U.S. long-dated Treasury yields remain near multi-decade highs after the global bond selloff.
The 30-year yield reached 5.3371%, its highest level since 2007. The 10-year Treasury yield was around 4.69% during Asian trading.
Rising borrowing costs increase the discount rate applied to future earnings. Consequently, richly valued technology stocks become less attractive as yields climb.
Investors will also watch the Federal Reserve’s July meeting minutes later Wednesday. Markets are looking for clues about how policymakers assess persistent inflation.
The U.S. is also scheduled to sell $16 billion of 20-year Treasury debt. Meanwhile, the lack of progress in the Iran conflict has kept Brent crude above $90 a barrel.
KOSPI plunges as chip rout erases recent rebound
South Korea’s KOSPI tumbled 5.5% to 6,495.1 points after falling as much as 6.4% earlier.
The index had gained more than 2% on Tuesday for a sixth consecutive session. That advance extended its powerful rebound from the late-July rout.
Wednesday’s reversal reflects heavy profit-taking as investors reassess the AI trade. Higher interest rates are also forcing markets to reconsider semiconductor valuations.
SK Hynix plunged 8.4%, while Samsung Electronics fell 7.3%.
The KOSPI’s decline briefly triggered a “sidecar” program-trading halt. The mechanism is designed to temporarily cool markets when selling becomes unusually intense.
Semiconductor exposure makes South Korea particularly vulnerable
The market backdrop has changed sharply following the KOSPI’s recent bull-market rebound.
Samsung Electronics and SK Hynix carry significant weight in the index. As a result, the KOSPI is particularly sensitive to changes in the semiconductor cycle.
The broader AI investment story remains intact. However, investors appear increasingly reluctant to pay an exceptionally high premium for future growth.
BofA said its latest survey showed that 59% of fund managers are hedging AI downside risk. They are rotating toward value, cyclical and defensive sectors, more than double July’s level.
Almost two-thirds also want clearer evidence of AI monetization before adding further AI exposure.
Japan and Chinese technology stocks slide
Japan’s Nikkei 225 fell 2.4%, while the TOPIX dropped 2.7%.
Kioxia led the technology selloff with an 8.9% decline. TDK fell 4.1%, while Sony lost 1.02%.
Chinese markets also moved lower.
The Shanghai Shenzhen CSI 300 declined 2.4%, while the Shanghai Composite lost 2%. Hong Kong’s Hang Seng was roughly unchanged.
Baidu tumbles while Xiaomi and Unitree buck the trend
Baidu plunged 12.5%, extending losses after quarterly revenue missed estimates. Weak advertising demand weighed on the company’s results.
Xiaomi, however, rose 6.4% despite reporting a sharp decline in second-quarter adjusted profit.
Investors instead focused on its faster-growing electric vehicle and AI businesses. Xiaomi’s EV revenue increased 15.9%.
China’s Unitree Robotics provided an even more striking counterpoint to the broader market selloff.
The humanoid-robot maker surged nearly sixfold during its Shanghai debut. Its initial public offering had been more than 8,000 times oversubscribed by retail investors.
Selling spreads across Asian markets
Other Asian markets also traded mostly lower.
Australia’s S&P/ASX 200 fell 0.3%, while Singapore’s FTSE Straits Times Singapore declined 0.36%.
India’s Nifty 50 opened 0.3% lower. Indonesia’s Jakarta Stock Exchange Composite Index slipped 0.6%.
Australia also remains in focus after RBA Deputy Governor Andrew Hauser said interest rates may need to rise again if inflation risks crystallize.
Bank Indonesia is due to announce its policy decision later Wednesday. The central bank is widely expected to keep interest rates unchanged.
What investors should watch next
The semiconductor selloff shows that markets are becoming increasingly sensitive to the combination of elevated valuations and high bond yields.
AI-related growth expectations remain powerful, but investors are demanding stronger evidence that large technology investments can generate sustainable earnings.
Treasury yields will therefore remain an important factor for growth stocks. The Federal Reserve’s communication could also influence expectations for the future path of interest rates.
At the same time, oil prices and developments in the Middle East remain another potential source of volatility.
For Asian equities, the immediate question is whether the semiconductor correction remains concentrated in technology or develops into a broader risk-off move.
