Asian markets are hitting fresh grim milestones as the artificial intelligence selloff deepened following the Democrats' decisive midterm election win. Tech-heavy markets are bearing the brunt of the rout, with Japan's Nikkei 225 Stock Average and Taiwan's Taiex Index entering technical bear markets. South Korea's Kospi gauge plunged as much as 8.8% at one point, triggering a trading halt and briefly falling below the closely watched 5,000 level.
The US midterm elections have added a fresh catalyst to the unwinding of the AI trade, which was already under pressure from doubts over whether massive investments in the technology will pay off. Expectations for tighter regulation under a Democratic-controlled Congress are adding to concerns about chipmakers and data-center suppliers. "The sheer violence and breadth of the selloff suggest this is more than routine profit-taking, but a deeper reassessment of the AI investment thesis that has underpinned much of the global equity rally," said Hebe Chen, market analyst at Vantage Global Prime.
The fallout is spreading to currencies and bonds. The Taiwan dollar weakened amid heavy equity outflows, while Japanese government bonds and Chinese sovereign debt gained as investors sought safety. Taiwan's key index sank 4.5%, bringing losses from its October peak to 20%, weighed down by a slump in Taiwan Semiconductor Manufacturing Co. Foreign investors have net sold more than $45 billion in local shares so far this quarter, according to Bloomberg-compiled data.
South Korean stocks have become the worst performers this quarter after leading major global markets in the first half of the year. Some market watchers see the plunge as a potential entry point. Nomura Holdings Inc. analysts reiterated a 10,000 target for the Kospi, saying Korean equities are oversold while fundamentals remain intact. The MSCI Asia Pacific Index was set for its seventh straight session of declines, the longest losing streak since August 2023.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing