AI bubble concerns hit Asia-Pacific stock markets, South Korean stocks plunge 4% at one point, SK Hynix turns positive, gold drops below 4000 intraday

The sell-off in technology stocks has spread from Wall Street to the Asia-Pacific region, prompting capital to shift towards bond markets and safe-haven currencies, and causing expectations for a Federal Reserve rate hike to plummet.

Asia-Pacific stock markets broadly declined on Friday, with the MSCI Asia-Pacific index dropping 1% and potentially recording a fourth consecutive week of losses. The Korean Composite Index led the declines, plunging more than 4% at one point, while Japan's Nikkei 225 index also fell nearly 2%.

Asian bond markets followed U.S. Treasuries overnight in moving higher. The yield on Japan's 10-year government bond fell by 10 basis points to 2.78%, the 5-year yield decreased by 10 basis points to 2.19%, and Australia’s 10-year government bond yield dropped by 10 basis points to 5.164%.

In the forex market, safe-haven currencies yen and Swiss franc strengthened. USD/JPY fell 0.2% to 156.44, posting a weekly decline of nearly 1%; USD/CHF dropped 0.1% to 0.8196, hitting a near one-month low. Gold did not benefit from risk-off sentiment, dropping below the $4,000/oz threshold at one point with an intraday decline of 0.7%. Silver fell even more sharply, with spot silver dropping as much as 2% intraday.

Oil prices, however, strengthened against the trend, with Brent crude climbing to a five-month high of $114 per barrel as escalating tensions in the Middle East continue to stoke concerns over energy supply disruptions.

South Korea became the worst-performing major market in the Asia-Pacific region.

The Korean Composite Index plunged more than 4% intraday on Friday before paring losses, but for October it has already fallen over 21%, making it one of the biggest global losers among major equity markets this month.

Samsung Electronics and SK hynix both slumped more than 4% at one point. Losses later narrowed, with SK hynix turning positive, while Samsung Electronics remained down more than 2%.

Wallstreet News mentioned that SK hynix announced it was suspending its assessment of a plan for its U.S. subsidiary Solidigm to list in the U.S., citing increased financial market volatility and a broad correction in semiconductor stocks. The company also needs to reassess whether an IPO aligns with the interests of current shareholders.

The South Korean Financial Supervisory Service also expressed concerns about whether Solidigm's U.S. listing would violate the country's dual-listing rules. FSS Governor Lee Chan-jin stated that regulators are reviewing the matter. SK hynix emphasized that Solidigm’s investment needs remain unchanged and will continue to explore alternative financing channels.

Furthermore, according to the Korea Financial Investment Association data through October 21, broker-dealer client deposits have fallen below 90 trillion won ($67.9 billion), the first time since January of this year. Foreign investors led this round of sell-offs, net selling $13 billion worth of KOSPI stocks in October, with the selling concentrated in tech sectors.

Roy Lim, stock sales trader at Samsung Securities, also pointed out that with broker deposits declining, retail investors' support for the market will be limited.

Jung In Yun, CEO of Fibonacci Asset Management, stated:

Investors are increasingly questioning whether large-scale AI investment can quickly translate into sustainable cash flow, while rising oil prices have added further uncertainty. Market sentiment is fragile, and investors are prioritizing capital preservation over buying the dip.

Japanese shares of electronic components and financials both slumped, dragging down the semiconductor supply chain.

The Nikkei 225 opened lower on Friday, at one point dropping more than 2%. Japanese consumer electronics and the semiconductor supply chain fell across the board, with downstream electronic component giant TAIYO YUDEN plummeting 7.60% and Murata Manufacturing tumbling 6.48%; smartphone and electronics parts maker TDK Electronics sank 7.30%.

Upstream materials supplier Mitsui Mining & Smelting fell 7.81% to lead declines, silicon wafer producer Sumco slumped 7.73%, and chip dicing equipment monopoly holder DISCO also sank 6.34%, reflecting a concentrated sell-off in the entire electronics hardware manufacturing sector.

The banking sector and financial stocks suffered across-the-board adjustments, with major commercial bank Resona Holdings plunging 7.24% in a single day, and regional banks Chiba Bank and Yokohama Financial Group down 6.24% and 6.16% respectively.

Data shows Japan’s core CPI rose 2.1% year-on-year in September, the highest this year, above 1.7% in August and matching the median forecast of economists polled by Reuters. Core CPI excluding fresh food and energy increased 2.4% year-on-year, surpassing the Bank of Japan’s inflation target and crossing 2% for the first time since March.

According to Ultima Markets senior analyst Elon Gu, "Since the market widely expects no rate change at the late October meeting and a hike only in December, short-term capital took profit after the inflation data, dragging Japanese banking stocks lower collectively. The increase in risk-off sentiment put pressure on long-term government bond yields and, combined with worries about rising funding costs for real-economy firms, further suppressed expectations for banks' net interest margin expansion.

Abhijit Surya, Senior Asia-Pacific Economist at Capital Economics, noted that this rapid acceleration is noteworthy, "especially as it comes even as fresh food inflation slows sharply and energy remains in deflation." He also pointed out that, although rice prices plunged 20.6% year-on-year, this sharp drop did not prevent overall goods inflation from rising to 2.8%, higher than August’s 2.6%.

Japan’s Minister of Economic Revitalization, Yoshimasa Hayashi, said Friday that the government will consider a range of factors such as CPI, GDP deflator, and deeper underlying factors behind core inflation, before officially declaring an end to deflation. He also stated, "The conditions for the government to formally announce the end of deflation are not yet mature."

He also expressed hope that the Bank of Japan would properly guide monetary policy in accordance with the joint statement reached with the government.

In the foreign exchange market, safe-haven assets diverged clearly. The yen and Swiss franc appreciated as market sentiment shifted.

USD/JPY fell 0.2% to 156.44 on Friday, with an overnight decline of 0.9%; USD/CHF also slipped 0.1% to 0.8196, hitting a near one-month low and falling 0.5% overnight.

Gold failed to benefit from risk-off sentiment, with spot gold briefly falling below the $4,000/oz mark, down 0.7% intraday. Silver performed even worse, with spot silver plummeting as much as 2% intraday to $53.51/oz.

Oil prices diverged from the trajectory of safe-haven assets and continued to climb. Brent crude futures rose to $114 a barrel, the highest in five months, while WTI also rose more than 1%. Houthi attacks on Saudi Arabia intensified market concerns over escalating Middle East conflicts and further disruptions to energy supplies.