By Tom Westbrook and Ankur Banerjee
SINGAPORE, July 28 (Reuters) – Chip stocks tanked across Asia on Tuesday, rattled by the threat of Chinese competition and worries about who’s paying for the AI boom, while sliding oil prices did little to allay nerves about U.S. rate hikes potentially starting as soon as this week.
South Korea’s KOSPI dived almost 10% 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% as their stratospheric rally unwinds in a hurry.
Japan’s Nikkei slid about 4%, touching a two-year low, with the selloff following a 2.2% drop for the Philadelphia Semiconductor index on Monday.
“There is no one red flag that’s moving the market,” said Chris Weston, head of research at broker Pepperstone in Melbourne, but rather a combination of nerves about AI funding and China’s rise as a competitor all along the supply chain.
China has begun manufacturing domestically developed immersion deep ultraviolet lithography machines, a chipmaking tool long dominated by Dutch supplier ASML, The Information reported on Monday, sending ASML shares down 8.5%.
China’s CXMT Corp, the world’s fourth-biggest memory maker, listed and raised $8.6 billion on Monday, too, 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 Kim Seok-hwan, a Seoul-based market analyst at Mirae Asset Securities.
Nvidia shares had already shed 5% overnight after the Wall Street Journal reported the company is in talks to provide roughly $250 billion in financing guarantees for OpenAI as part of a massive data centre project.
CXMT shares were last about 3% lower in bumpy trade in Shanghai, while in Tokyo market darlings Kioxia, down 18%, and Tokyo Electron, down 11%, were among the top losers.
OIL SLIDES, US RATE HIKE EYED
Brent crude futures extended Monday’s nearly 9% plunge, falling more than 1% to $87.19 a barrel, as a lull in hostilities between the U.S. and Iran followed Washington’s abrupt suspension of air strikes on Saturday.
President Donald Trump said on Monday the United States was having “good talks” with Iran and there was a chance of a deal.
The break in fighting pushed down benchmark 10-year U.S. Treasury yields by about 4 basis points to 4.64% 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% chance that the Federal Reserve hikes by 25 basis points on Wednesday.
“The U.S.-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,” said Thierry Wizman, currency and rates strategist at Macquarie Group.
“We expect that the (Fed) this week will wish to adopt a tightening bias.”
Expectations for hikes sooner or later kept the dollar supported, holding the euro below $1.14 at $1.1362 and the Australian dollar just below 70 cents. [AUD/]
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 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.
(Reporting by Tom Westbrook; Editing by Shri Navaratnam and Saad Sayeed)
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