Asian equities stumbled on Thursday, with South Korea's KOSPI and Japan's Nikkei 225 giving back recent gains as renewed selling in artificial intelligence-related shares overshadowed upbeat earnings from US tech giants.
The KOSPI dropped nearly 2% to around 5,635, eroding part of Wednesday's 3.29% surge. The Nikkei 225 reversed an early advance, falling roughly 1.6% to below 64,000. Both were intraday readings, reflecting volatile sentiment.
The pullback came as the Bank of Korea held its benchmark interest rate at 3%, following hikes in July and August. Brent crude climbed above $110 a barrel, adding to inflationary pressures. Investors are questioning whether robust chip demand can justify the heavy capital spending on AI infrastructure.
Korea's Rate Pause Offers Little Comfort
Wednesday's rally had lifted the KOSPI to 5,735.66, driven by gains of 5.67% in Samsung Electronics and 5.81% in SK Hynix. Foreign investors bought a net 660 billion won of shares, interrupting October's outflows.
That momentum faded on Thursday. Samsung lost more than 3% and SK Hynix nearly 4% in early trading. LG Energy Solution, Samsung SDI, and Hyundai Motor also declined, broadening the retreat.
The Bank of Korea's decision to hold rates came with upgraded growth forecasts and the possibility of further tightening. Inflation stood at 2.9% in September, above the central bank's 2% target.
Daishin Securities analyst Lee Kyoung-min, in an assessment published by Korea JoongAng Daily this week, argued that concerns about AI credit risk and profitability were limiting the durability of chip-share rebounds.
Nikkei's Chip Retreat Collides with Energy Vulnerability
In Tokyo, Tokyo Electron lost 3.7%, Fujikura 2.8%, and Ibiden 2.6% in early trading. Kioxia and SoftBank also weakened as Wednesday's recovery faded.
The retreat contrasted with stronger US earnings. Meta beat revenue expectations and Super Micro Computer raised its outlook, but investors remain uncertain about returns on debt-financed AI investment.
Commerzbank analysts acknowledged that solid AI earnings had supported sentiment, while noting that renewed Middle East tensions were restraining risk appetite. Brent rose around 1.1% to $110.03 as security threats around Gulf energy infrastructure returned to focus.
Japan's heavy reliance on fuel imports magnifies that shock. A yen near 158 per dollar compounds the cost, while the Bank of Japan meets on October 30.
Wider Asian Markets Show Recovery Losing Breadth
The MSCI Asia-Pacific benchmark outside Japan slipped 0.2% as Wednesday's optimism faded. Hong Kong's Hang Seng fell about 2.1% amid pressure on technology and battery shares, while the Shanghai Composite lost roughly 0.9% and the CSI 300 declined about 1.3%.
Taiwan's TAIEX edged 0.2% lower after an early gain, and Australia's ASX 200 was down about 0.6%. Japan's broader Topix had initially risen, highlighting differences between benchmarks in earlier trade.
KCM Trade analyst Tim Waterer, in commentary carried by Bloomberg, said investors were struggling to find a satisfactory level of AI capital spending: increasing budgets raises financing worries, while cuts can suggest weaker growth expectations.
This article is for informational purposes only and does not constitute financial advice.
