KOSPI Slumps 7%: Chip Rout and Fed Rate Fears

Asian equity markets fell sharply on Thursday, led by South Korea's KOSPI index, which dropped 7%. The decline was driven by a sell-off in semiconductor stocks and concerns regarding Federal Reserve interest rate decisions. The move extended losses across the region's technology-heavy markets, following a weak session on Wall Street where the tech-heavy Nasdaq Composite tumbled 1.9% overnight.

The Philadelphia Semiconductor Index extended its losing streak to six sessions, its longest since May 2025. In Asian trade, Nasdaq 100 futures dropped 0.9% and S&P 500 futures lost 0.4%. Other regional indices also weakened, with the MSCI Asia Pacific index falling nearly 3%, putting it on course for its weakest level since July. Japan's Nikkei 225 sank 4.7%, while Hong Kong's Hang Seng fell 1.1% and China's CSI 300 dropped 1.4%.

South Korean memory-chip makers bore the brunt of the selloff, with SK Hynix plunging 11.2% and Samsung Electronics falling 9.4%. Japan's Kioxia and LG Innotek lost over 10%. The declines extended a rout triggered by concerns over Chinese semiconductor competition, after ChangXin Memory Technologies made progress on a higher-density DRAM design. Broadcom CEO Hock Tan's warning that some AI investors are effectively gambling has added to concerns over stretched valuations.

Hotter-than-expected U.S. inflation, driven partly by gasoline prices, strengthened the case for further Fed tightening. Markets raised the implied probability of a 25-basis-point hike at the Fed's October 27-28 meeting to 31.6%, from 22.1% a day earlier. Federal Reserve Chair Kevin Warsh has said he will not guide markets through his own near-term policy outlook, but his remarks on Friday in Bangkok will face close scrutiny. Investors are also awaiting U.S. producer-price and retail-sales data later on Thursday.

With Taiwan Semiconductor Manufacturing due to report later in the day, investors are looking for a sixth consecutive quarter of record earnings and upbeat guidance to reassure markets that booming AI-chip demand can sustain growth. Meanwhile, oil prices eased, with Brent crude down $1.39 to $104.67 a barrel and U.S. West Texas Intermediate down $1.02 to $94.07. Singapore's Straits Times dropped 0.9% a day after the Monetary Authority of Singapore unexpectedly left monetary policy unchanged.