Asian equities faced a cautious session on Thursday, with Japan's Nikkei 225 retreating below the 70,000 mark and South Korea's KOSPI giving up early gains even after Samsung Electronics posted a record quarterly profit. The moves underscore how rising global borrowing costs are overshadowing strong earnings in the region's key semiconductor markets.
The Nikkei declined 0.7% to 69,559.50, dragged down by machinery makers and trading houses. Meanwhile, the KOSPI slipped 0.2% to 6,793.26 by mid-morning in Seoul, after opening slightly higher. Foreign investors sold a net 635.7 billion won of Korean shares, while domestic institutions also trimmed exposure.
Samsung's record profit fails to lift KOSPI
Samsung Electronics reported preliminary third-quarter operating profit of 107.4 trillion won, a surge of 782.5% from a year earlier, with revenue climbing to 195 trillion won. The figure exceeded brokerage consensus estimates. However, Samsung shares edged down about 0.2% after an initial premarket gain, and the KOSPI remained under pressure.
The muted reaction suggests that much of the memory chip boom is already priced into valuations, and investors are now more focused on foreign flows, the won's strength, and the durability of AI-related spending. Meritz Securities analyst Kim Sun-woo noted that Samsung's pricing strategy helped offset the drag from a stronger Korean currency. Memory chips, including high-bandwidth memory (HBM) products for AI systems, were widely seen as the primary earnings driver.
Foreign selling was heavy on Wednesday as well, when the KOSPI fell nearly 2%, and Thursday's record earnings were insufficient to reverse that trend.
Nikkei slips as high borrowing costs hit cyclicals
The Nikkei's decline had a different character, with cyclical stocks bearing the brunt. Komatsu fell 4.8% and Mitsui & Co. lost 3.7%, as investors reduced exposure to machinery and trading houses. The index has struggled to hold above 70,000 after a sharp rally earlier this month. A slightly firmer yen, near 157.9 per dollar, removed some support for exporters, while elevated global bond yields kept pressure on valuation-sensitive shares.
Barclays strategists, led by Emmanuel Cau, said Japan remains one of the bank's preferred equity markets, but further gains depend increasingly on stability in interest rates and energy prices.
AI debt and $100 oil keep macro pressure high
The broader Asian backdrop was cautious. MSCI's Asia-Pacific index outside Japan slipped 0.1%, while US equity futures were little changed and European futures edged higher. The bigger issue is funding: Broadcom, Oracle, and SpaceX are seeking tens of billions of dollars in financing for AI chips and infrastructure. Broadcom is discussing more than $50 billion, while SpaceX is exploring about $40 billion.
That borrowing wave is arriving as sovereign debt markets are already strained. The US 10-year Treasury yield hovered around 5.30% after hitting a 24-year high, while Federal Reserve minutes showed most policymakers still saw another rate increase as likely this year. Oil added another complication, with Brent trading around $101.14 and WTI near $89.02, keeping inflation risk alive.
This article is for informational purposes only and does not constitute financial advice.
