Asian stocks drop, led by losses in South Korea

MSCI AC Asia Pacific ex Japan index dropped nearly 3.5%

Asian stocks dropped on Wednesday, led by sharp losses in South Korea, as a selloff in technology shares extended for a second straight session.

Risk appetite also deteriorated after Iran launched new attacks at U.S. in the Middle East, shattering the relative calm that had emerged around ceasefire negotiations and sending oil prices sharply higher, reviving concerns over inflation and the international interest-rate outlook.

MSCI AC Asia Pacific ex Japan index dropped nearly 3.5%.

Investors continued to reassess lofty artificial intelligence valuations, mounting capital spending commitments and intensifying competition across the semiconductor industry.

KOSPI declined over 6% after slumping more than 12% earlier in the day, extending Tuesday’s historic rout that saw the index suffer its biggest one-day loss in almost five months.

The benchmark has now fallen roughly 34% from its recent high, prompting renewed debate over whether the correction could begin tightening domestic financial conditions enough to influence monetary policy, according to Nomura analysts.

SK Hynix Inc plunged more than 12%, even after reporting record quarterly profit driven by robust demand for high-bandwidth memory chips used in artificial intelligence servers. Samsung Electronics shed more than 8%, while LG Innotek declined around 13%.

SK Hynix was down more than 20% at its session low before trimming some losses.

Japan also remained under heavy pressure, with the Nikkei 225 shedding almost 1.3%, while technology and electronics names bore the brunt of selling.

Kioxia Holdings and Murata Manufacturing Co Ltd plunged more than 15%.

The latest weakness also reflected growing concerns that China’s rapidly developing semiconductor ecosystem could intensify competitive pressures for chipmakers across Japan and South Korea.

Chinese equities, however, outperformed peers. Hang Seng gained nearly 1.5%, while Shanghai Shenzhen CSI 300 added nearly 0.5% and the Shanghai Composite edged 0.2% higher as investors rotated into domestic shares after recent underperformance across technology markets.

The S&P/ASX 200 jumped to its highest level since early April after softer-than-expected inflation data prompted traders to sharply scale back expectations for another RBA rate hike.

Mining heavyweight Rio Tinto jumped around 4.8% after reporting earnings that beat analyst expectations, reaching its highest level since July 7.

FTSE Straits Times Singapore added nearly 0.5%, supported by financial stocks, while Nifty 50 traded little changed.