SINGAPORE, July 28 — Chip stocks tanked across Asia on Tuesday, rattled by the threat of Chinese competition and worries about who is paying for the artificial intelligence (AI) boom, while sliding oil prices did little to allay nerves about United States (US) rate hikes potentially starting as soon as this week.
South Korea's KOSPI dived almost 10 per cent to a three-month low, triggering a circuit breaker on the way down as it heads for its largest monthly fall since the Asian financial crisis in 1997. The index had more than tripled over 12 months to June, but it has shed more than a third of its value since that peak.
Shares in SK Hynix and Samsung Electronics, which are under extra pressure in a market transformed by leverage, made losses of more than 12 per cent as their stratospheric rally unwinds in a hurry.
Japan's Nikkei slid about four per cent, touching a two-year low, with the selloff following a 2.2 per cent drop for the Philadelphia Semiconductor index yesterday.
"There is no one red flag that is moving the market, but rather a combination of nerves about AI funding and China's rise as a competitor all along the supply chain," said Melbourne-based broker Pepperstone's head of research Chris Weston.
Yesterday, The Information reported that China has begun manufacturing domestically developed immersion deep ultraviolet lithography machines, a chipmaking tool long dominated by Dutch supplier ASML, sending ASML shares down 8.5 per cent.
China's CXMT Corp, the world's fourth-biggest memory maker, listed and raised US$8.6 billion (RM35.15 billion) yesterday as well, ending its debut session as China's most valuable company.
"The market's concern lies less in CXMT's current earnings and more in its potential for accelerated capacity expansion to rival Korean companies," said Seoul-based Mirae Asset Securities' market analyst Kim Seok-hwan.
Nvidia shares had already shed five per cent overnight after the Wall Street Journal reported the company is in talks to provide roughly US$250 billion (RM1.02 trillion) in financing guarantees for OpenAI as part of a massive data centre project.
CXMT shares were last about three per cent lower in bumpy trade in Shanghai, while in the Tokyo market, darlings Kioxia, down 18 per cent, and Tokyo Electron, down 11 per cent, were among the top losers.
Oil slides, US rate hike eyed
Brent crude futures extended Monday's nearly nine per cent plunge, falling more than one per cent to US$87.19 a barrel, as a lull in hostilities between the US and Iran followed Washington's abrupt suspension of air strikes on Saturday.
On Monday, President Donald Trump said that the US was having "good talks" with Iran and there was a chance of a deal.
The break in fighting pushed down benchmark 10-year US Treasury yields by about 4 basis points to 4.64 per cent on Monday, but hardly budged shorter-term rates, and traders were not in the mood to move yields any lower in Asia on Tuesday.
Markets have priced about a 38 per cent chance that the US Federal Reserve hikes by 25 basis points on Wednesday.
"The US-Iran war, by propelling the price of crude oil, remains the most important determinant of what will happen to the global economy...and, by extension, what informs central bank policy outlooks, at the margin.
"We expect that the (US Fed) this week will wish to adopt a tightening bias," said Macquarie Group currency and rates strategist Thierry Wizman.
Expectations for hikes sooner or later kept the dollar supported, holding the euro below US$1.14 at US$1.1362 and the Australian dollar just below ¢70.
The yen traded at 163.78 to the dollar, barely above a four-decade low, with markets on edge about Japan intervening in the currency pair — particularly if the Bank of Japan (BOJ) leaves rates on hold this week and sets off another yen slide.
"If BOJ communication is not hawkish enough and USD/JPY heads higher, traders should anticipate an official response, including verbal intervention, rate checks, or even direct FX market intervention, perhaps on Friday," said Wizman.
