Asian stocks drop on chipmaker weakness as South Korea’s Kospi falls 4%

ASIAN stocks slipped as renewed weakness in chipmakers weighed on regional benchmarks, underscoring investor caution towards the sector despite a recent rally. Gold climbed to the highest level since June.

South Korea’s Kospi Index fell 4 per cent with SK Hynix and Samsung Electronics leading the losses.

Memory maker Sandisk slid 8 per cent and rival Western Digital plunged 12 per cent in post-market trading after reporting earnings. Sentiment improved, with S&P 500 Index futures rising 0.2 per cent.

“Investors are increasingly asking what incremental catalysts are needed to remain in the Asia memory trade,” said Gary Tan, a portfolio manager at Allspring Global Investments.

Losses in Korea and Japan pushed the MSCI Asia Pacific Index down 1 per cent. Investors will get a fresh gauge of the artificial intelligence trade when SoftBank Group reports earnings later on Thursday (Aug 6).

Among the main market moves, S&P 500 futures rose 0.2 per cent as at 11.58 am Tokyo time.

Japan’s Topix fell 0.4 per cent, Australia’s S&P/ASX 200 rose 0.4 per cent, Hong Kong’s Hang Seng fell 1.7 per cent and the Shanghai Composite rose 0.3 per cent.

Attention is also on the US$101 billion of SpaceX shares becoming available for trading. 

Elsewhere, gold rose to US$4,275 an ounce on expectations that a reopening of the Strait of Hormuz and lower oil prices would ease pressure on the US Federal Reserve to increase interest rates, which typically lessens the appeal of non-yielding bullion.

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Brent traded under US$80 a barrel after Iran said it had reached an agreement with Oman on a proposed shipping route through the strait, a potential step towards reopening the critical waterway.

The pause in the tech-led rally came as investors reassessed valuations after AI-related shares rebounded from July’s bruising sell-off, which hit several hedge funds.

Traders are also focused on developments in the Middle East for clues on the direction of oil prices, with knock-on effects for inflation and rate policies of central banks.

“Investors are likely to view the losses in Korea and Japan with only modest concern. The recovery in US futures suggests Wall Street may be on firmer footing when cash trading begins later Thursday,” said Mark Cranfield, a Bloomberg strategist.

Chipmakers have had a volatile month as even robust earnings from companies failed to impress investors, sending shares plunging. Dip buyers then emerged to offer a reprieve.

The MSCI World Semiconductor Index had tumbled more than 20 per cent from its peak in June, driven by worries around the sustainability of the AI spending boom and progress in China’s advanced chipmaking. The gauge has rebounded around 15 per cent since then.

Elsewhere, global bond and currency investors are debating if it is time to dust off 2025’s Sell America trade after a flurry of economic-policy decisions out of Washington over the past two weeks.

With fiscal concerns, a trade war and the ongoing conflict in the Middle East also threatening to underpin inflation, some in markets are starting to reassess their taste for US bonds and the greenback amid concern that US policy is again becoming hard to decipher. 

Meanwhile, just days after his hedge fund was on the brink of collapse, Leopold Aschenbrenner made a return to the investing scene.

Last week, Situational Awareness nearly buckled under a barrage of margin calls from lenders across Wall Street and ultimately reached a deal with Ken Griffin’s Citadel to offload the bulk of its public stock portfolio.

The hedge fund “bailout” provided some short-term support to technology stocks, but it did little to resolve the underlying questions such as how much capital will ultimately be deployed and how serious the competitive challenge from Chinese AI companies will become, said Rajeev de Mello, global macro portfolio manager at Gama Asset Management. 

“Until there is greater clarity on those issues, the sector is likely to remain volatile,” he said. BLOOMBERG