Markets Briefing: Chip Selloff Slams the KOSPI as the AI Trade Reverses and Korea Starts Hiking
Asian equities tumbled as a sharp reversal in the artificial-intelligence trade sent semiconductor stocks sliding, unwinding much of this week's rally. South Korea's KOSPI slumped by 6.56 per cent at one point, and Japan's Nikkei fell 2.95 per cent (BBG), with SK Hynix and Samsung leading heavy losses after an overnight rout in US chipmakers. Analysts framed the move as profit-taking and valuation digestion in a crowded trade rather than a deterioration in demand, citing a proposed New York data-centre moratorium and reports of memory-price hedging, and noting that semiconductors now make up roughly a fifth of the S&P 500 (CNBC). The sell-off came even as ASML raised its full-year guidance.
The picture was uneven across the region. Hong Kong's Hang Seng bucked the decline, rising 1.93 per cent, while mainland China's CSI 300 fell 0.91 per cent and Australia's benchmark eased 0.35 per cent (BBG). US equity-index futures steadied and European futures were mixed, a sign the selloff may stay contained to the chip complex for now.
The Bank of Korea delivered the region's main event, raising its policy rate a quarter point to 2.75 per cent in a unanimous decision, its first hike since early 2023 and the start of a new cycle (BBG). Governor Shin flagged the possibility of further increases, citing the AI-led chip boom, above-target inflation, a weak won and financial-stability risks including leverage-fuelled stock investment. Overnight from the US, the Federal Reserve's Beige Book showed activity expanding at a slight to moderate pace with moderate price increases, some tied to the Middle East conflict and others to tariffs (BBG). Officials stayed split, with Governor Cook saying she is prepared to act if inflation does not cool (Reuters) while New York's Williams judged that too-high inflation may soon subside (Reuters), and the Bank of Canada held its rate as guidance turned more neutral (WSJ).
In currencies, the dollar held near a one-month low after this week's softer inflation data; the Dollar Index barely changed, and the euro moved little (USNews). The won firmed after the Bank of Korea's hike, the pair down 0.21 per cent, while the yen hovered near multi-decade lows, with options positioning suggesting scope for further weakness before officials step in (BBG). Japanese Finance Minister Satsuki Katayama repeated her aim to encourage the Government Pension Investment Fund to allocate more to domestic financial assets, while noting that she cannot direct the fund’s investment decisions. The Swiss franc eased 0.17 per cent against the dollar.
Government bonds steadied after the prior session's rally on softer US producer prices. Japanese 10-year yields ticked up 1.2 basis points, and Australian 10-year yields rose 0.3 basis points (BBG), giving back a little of the move, while US 10-year yields edged up 0.8 basis points.
In commodities, crude eased 0.26 per cent and natural gas fell 0.34 per cent, oil erasing an earlier advance driven by fresh US strikes on Iran (FT). The backdrop stays tense, with the renewed shutdown of the Strait of Hormuz and depleted spare inventories leaving the market more exposed to a supply crunch than earlier in the conflict (FT). Gold slipped 0.64 per cent and silver fell 1.18 per cent as precious metals gave back gains, while copper rose 1.20 per cent. Bitcoin eased 0.27 per cent. Nickel climbed to a three-week high as expectations for Federal Reserve rate hikes faded, while uncertainty over mining policy in top producer Indonesia clouded the supply outlook, according to Bloomberg.
Australia's consumer inflation expectations eased to 4.7 per cent from 5.5 per cent, the lowest since January, a cooler read the Reserve Bank of Australia will welcome (BBG). Over 90% of Japanese households expect prices to rise a year from now, a central bank survey showed on Thursday, higher than three months ago in a sign of broadening inflationary pressure that could heighten the case for further interest rate hikes. (RTRS)
In the corporate tape, the chip complex dominated, with SK Hynix, Samsung, and Japanese equipment makers all sharply lower, even as ASML lifted its outlook (CNBC). Elsewhere, King Street restricted client withdrawals from its hedge fund, a pocket of credit-fund stress (BBG), and Chinese data showed record consumer-loan defaults, undermining Beijing's push to lift household spending (Reuters).
Looking ahead, the Western data are led by US retail sales for June at 14:30 CET, alongside the Philadelphia Fed manufacturing survey and weekly jobless claims. Europe brings the UK's May GDP at 08:00 CET, the Swiss National Bank's meeting minutes at 09:30 CET, and Italy's final June inflation at 10:00 CET, with Canadian housing starts the day after the Bank of Canada's decision. Three Federal Reserve regional presidents also speak, Musalem, Logan and Schmid, a hawkish chorus into a market that has just moved to price out a near-term Fed rate rise (full report).
Time Stamp: 16 July 2026, 06:50 CET