Inflation reignites interest rate hike expectations, Asian stock markets plummet, Nikkei down 4%, Korean stocks down over 7%, SK Hynix crashes 10%

U.S. inflation data unexpectedly rose, coupled with concerns over the valuation bubble in artificial intelligence, leading to a new wave of impact on global tech stocks. The Asia-Pacific markets opened sharply lower on Thursday, with the South Korean stock market experiencing particularly severe declines, prompting the exchange to activate its circuit breaker mechanism.

On Thursday, the South Korean Composite Index opened down over 7%, triggering the exchange's circuit breaker mechanism. The Korea Exchange subsequently activated the Sidecar mechanism for both KOSPI and KOSDAQ, suspending programmatic sell orders. Samsung Electronics and SK Hynix both saw significant drops.

The Nikkei 225 index fell more than 4%, with SoftBank plunging nearly 10% and Kioxia dropping over 10%. The MSCI Asia-Pacific Index fell more than 1% to around 266 points, marking its fourth consecutive day of decline. Nasdaq 100 futures further dropped about 1% during Asian trading hours.

Chip Stock Sell-off Spreads Across Asia-Pacific, South Korea Triggers Circuit Breaker

After the Asia-Pacific markets opened, panic quickly spread. Growth sectors represented by semiconductors, optical communications, and AI hardware infrastructure saw a collective and significant pullback.

The MSCI Asia-Pacific Index fell over 1%, closing at 266.28 points, marking its fourth consecutive day of decline. The South Korean market experienced the most severe downturn. After opening down 5.6%, the Composite Index further declined, with losses expanding to 7.56%.

Samsung Electronics and SK Hynix fell over 9% and 10%, respectively, prompting the Korea Exchange to activate the Sidecar mechanism for both KOSPI and KOSDAQ indices, suspending programmatic sell orders to ease abnormal market fluctuations.

The Japanese market also saw significant declines. The Nikkei 225 index fell over 4%, while the Tokyo Stock Exchange index dropped by 2.3%.

Among them, high-end chip packaging substrate giant Ibiden plummeted 10.27%; semiconductor wafer manufacturer Sumco dropped 9.53%; EUV inspection equipment unicorn LASERTEC and memory chip giant Kioxia fell 8.64% and 8.48%, respectively.

Meanwhile, previously popular data center construction cable giants Fujikura and Furukawa Electric also faced sharp declines, dropping 9.02% and 8.37%, respectively. Tech investment giant SoftBank Group fell 7.62%, while upstream resources and electronic materials representative Sumitomo Metal Mining also closed down 7.13%.

The S&P/ASX 200 index in Australia fell 0.8%. Nasdaq 100 futures extended their decline to 1%, while Hang Seng futures dropped 1.1%.

Despite the spread of panic in the market, some analysts maintain a cautiously optimistic view on the long-term demand prospects for AI. Dan Ives noted in a research report:

Higher yields have increased the financing costs for these projects, and it is correct for investors to focus on balance sheets and contract structures, but the interest rate issue is a financing issue, not a demand issue.

He believes that the current pullback provides a buying opportunity for investors and emphasizes that the AI infrastructure construction boom is still in its early stages. Ives also clarified the conditions required for a change in his viewpoint, including substantial demand weakness signals such as major cloud computing companies cutting capital expenditure plans, contract cancellations, or declines in GPU rental prices—"What will change our view will be demand signals, not interest rate signals."

Inflation Data Rekindles Rate Hike Expectations

According to Wall Street Journal, the U.S. September CPI rose 3.7% year-on-year, and core CPI increased to 2.6%, both exceeding expectations, with energy and service prices jointly pushing up inflation. Following the data release, market bets on a rate hike by the Federal Reserve in October briefly rose to 50%, while the probability of a rate hike in December soared to over 95%.

Ronald Temple, Chief Market Strategist at Lazard, stated:

Today's CPI report shows that inflationary pressures are spreading, and the Federal Reserve faces an increasing risk of falling behind the curve.

Skyler Weinand from Regan Capital remarked:

Inflation is stubborn and moving in the opposite direction, which couldn't be clearer. We expect the Federal Reserve to pause rate hikes in October but anticipate a resumption of the rate hike cycle in December.

The 10-year yield fell 2 basis points overnight in New York to 5.19%, and further declined 5 basis points during Thursday's Asian session to 5.137%.

Dollar Weakens, Gold Prices Decline for Four Consecutive Days

In terms of exchange rates, the dollar showed weakness during Thursday's Asia-Pacific session, giving back some of the overnight gains, with the dollar index down 0.3%, the euro rising to 1.1195, and the yen slightly strengthening to 157.94 against the dollar.

In the commodities market, spot gold prices quickly rebounded 0.87% to around $4141 per ounce, but had previously fallen for four consecutive days, touching approximately $4100 overnight.

WTI crude oil was reported at $94.70 per barrel, down slightly by 0.55%.