Asian stocks struggle after week of market turbulence

MSCI’s broadest index of Asia-Pacific shares outside Japan was flat after swinging wildly between gains and losses

Asian stocks struggled for direction in choppy trading on Thursday after a week of market turbulence sparked by artificial intelligence jitters.

Brent futures slid below $90 per barrel, after climbing over 7% a day earlier as fighting in the Middle East escalated. However, data showed that tankers continued to make their way out despite the continued strikes.

Asian chipmakers have been at the centre of attention this week after a bruising sell-off in South Korean equities wiped more than $2 trillion off market value and heightened investor anxiety over the payoff from huge AI investments.

Uncertainty about US monetary policy, the sharp steepening of the Treasury yield curve, growing tensions in the Middle East and continued worries about the semiconductor industry and AI sector mean that markets are likely to stay volatile in the near term, said Vasu Menon, managing director of investment strategy at OCBC.

The Kospi was down 0.6% in choppy trading, on track for a 15% weekly slump.

The sell-off prompted South Korea’s Finance Minister Koo Yun-cheol to apologise for the roll-out of single-stock leveraged exchange-traded funds and led authorities to unveil market stabilisation measures.

MSCI’s broadest index of Asia-Pacific shares outside Japan was flat after swinging wildly between gains and losses. Nikkei was 1.2% higher, but set for a 3.7% drop in the week.

Given that the fundamental thesis remains intact, there does appear to be an irrational, panic-like element to the current selling, said Gina Kim, portfolio manager for emerging market equities at Nordea Asset Management in Singapore.

I cannot comment on when the panic will stop as such but some indicators to look out for would be margin balances in both Taiwan and Korea for retail investors. Both are declining but we would ideally need to see some levelling off, said Kim.

Chipmaker Samsung Electronics said its operating profit jumped 19-times to a record in the second quarter, helping lift beaten-down investor sentiment.