Emerging Asian markets fall for third session on AI anxiety

Emerging Asian markets extended their losing streak to a third consecutive session on Thursday as persistent concerns over the artificial intelligence trade continued to batter tech-heavy indices in South Korea and Taiwan, while a divided Federal Reserve added to investor uncertainty.

AI Sell-off Deepens Regional Losses

The MSCI EM Asia stocks index fell 0.3%, shedding around 6% over three sessions and declining 11.7% so far in July — heading for its weakest monthly performance since March. South Korea's Kospi dropped around 1%, while Taiwan's benchmark surrendered earlier gains to slip 0.3%.theedgemalaysia

AI-linked indices in Seoul and Taipei were set to finish July down 34% and 13.4%, respectively, with the Kospi on track for its weakest month on record. The sell-off has been exacerbated by single-stock leveraged ETFs in South Korea, which prompted regulators to cap investments in these products. South Korean Finance Minister Koo Yun-cheol earlier apologized for the introduction of these leveraged products, saying they had not been considered carefully enough.aljazeera+1

"Higher-for-longer interest rates may weigh on valuations, increase financing costs and make it more expensive to raise fresh capital, potentially slowing the pace of AI investment," said James Ooi, market strategist at Tiger Brokers. The Federal Reserve left rates unchanged on Wednesday, with Chair Kevin Warsh pledging to bring inflation down while leaving investors uncertain about the central bank's policy path.reuters+1

Indonesia and India Buck the Trend

Indonesia's Jakarta Composite Index bucked the regional trend, advancing as much as 1.3% as it found footing after the surprise departure of central bank governor Perry Warjiyo earlier in the week had renewed concerns about institutional independence.theedgemalaysia

Indian equity benchmarks had rallied the prior session, with the Nifty 50 climbing 1.1% and the BSE Sensex rising 1.16%, as investors rotated out of crowded AI trades and into domestic IT and emerging market assets. The Nifty IT index outperformed with a 2.3% gain, continuing an upward trend of 9.1% over four trading sessions.whalesbook

Currencies Under Pressure

Regional currencies edged lower against a firm dollar. The Indonesian rupiah slipped toward its record low, trading near 18,090 per dollar and on course for a fifth straight month of declines. The Taiwan dollar and Thai baht weakened, though the South Korean won was an outlier, appreciating to its highest point since late February.theedgemalaysia

Thailand shares fell as much as 2.3% to a near one-month low after a long holiday, while Singapore's Straits Times Index declined as much as 1.3% a day after hitting an all-time high.theedgemalaysia