Circuit breaker halts Kospi as chip rout spreads to Asia

A tech-led selloff that started on Wall Street spread across Asia on Thursday, October 15. South Korea's Kospi fell 8% during the session, which set off a circuit breaker, and Japan's Nikkei 225 dropped 4.8%, according to Business Standard. Hotter-than-expected US inflation data had raised bets on more Federal Reserve rate hikes and added to worries about how the AI build-out will be financed.business-standard.com

Seoul halts trading

The Korea Exchange first triggered a "sidecar" at 9:07 a.m., a five-minute pause on program sell orders. At 12:38 p.m. it halted Kospi trading for 20 minutes after the index fell 8.00%, MoneyToday reported. The Kosdaq had triggered its own circuit breaker 16 minutes earlier. It was the first time both markets halted on the same day since July 29, SBS reported. The Kospi closed down 7.57%, with foreign investors net sellers of about 3.6 trillion won, Asia Economy reported.news.sbs.co.kr+2

Chipmakers took the biggest hits. Samsung Electronics fell 9.7% and SK Hynix ↘ 6.58% lost 11.35%, after the Philadelphia Semiconductor Index PHLX Semiconductor Index ↘ 3.84% dropped 4.3% overnight, according to The Hindu BusinessLine. SoftBank Group fell 9.4% and Kioxia Holdings dropped more than 11%. A Daishin Securities researcher said the Kospi has fallen about 20% over the past six trading days.asiae.co.kr+2

Inflation and AI financing

On Wednesday, October 14, the S&P 500 fell 1.1% to 7,718.94 and the Nasdaq Composite dropped 1.9%, its worst day since July, the Associated Press reported. US consumer prices rose 3.7% from a year earlier in September. That was faster than August's 3.4% and above the 3.6% economists expected, partly because of fuel costs tied to the war with Iran. CoreWeave ↘ 11.91% fell 15.5%, Oracle ↘ 4.64% fell 8.8% and Nvidia ↘ 1.43% lost 3.2%.arkansasonline.com

"The US CPI surprise and CoreWeave bond selloff are prompting investors to reassess financing risks across the AI sector," Jung In Yun of Fibonacci Asset Management Global told Bloomberg. Bloomberg reported that markets now price about 40 basis points of Fed hikes by the end of January. Treasuries rallied as investors moved into safer assets.swissinfo.ch

Mixed views on the rout

Some strategists played down the damage. "Investors are not questioning whether AI demand exists," said Charu Chanana of Saxo Bank. She said they are instead questioning "what price they should pay for that growth when interest rates are high." Mark Matthews of Julius Baer said he was "not worried," noting there is "no sign of a recession".business-standard.com

Investors are now watching for remarks from Fed Chair Kevin Warsh in Bangkok, US producer price and retail sales data, and third-quarter earnings from Taiwan Semiconductor Manufacturing ↘ 2.28%, all due later Thursday, according to Business Standard.business-standard.com