Technology Sell-Off, Surprise Interest Rate Hike in South Korea and Rising Middle East Tensions Trigger Broad Weakness Across Asian Equities, While Hong Kong Outperforms on Alibaba Rally

Asian stock markets witnessed a broad sell-off on Thursday as investors turned cautious amid a sharp decline in artificial intelligence (AI) and semiconductor stocks, a surprise interest rate hike by South Korea's central bank, and continuing geopolitical uncertainty in the Middle East. Technology shares led the decline across major regional markets, dragging benchmark indices in South Korea and Japan sharply lower despite overnight gains on Wall Street.

The biggest setback came from South Korea, where the Kospi Index plunged 6.6%, its steepest decline in several months, following aggressive selling in semiconductor heavyweights and the Bank of Korea's decision to raise interest rates for the first time since 2023.

Meanwhile, Japan's Nikkei also suffered significant losses as investors booked profits in AI-linked companies. Taiwan remained cautious ahead of Taiwan Semiconductor Manufacturing Company's (TSMC) quarterly earnings, while Hong Kong stood out as the only major Asian market to end higher after Alibaba surged on positive developments related to Apple's artificial intelligence rollout in China.

The mixed performance across Asia reflects the growing influence of artificial intelligence valuations, monetary policy decisions and geopolitical developments on global financial markets.

South Korea Leads Regional Decline

South Korea experienced the sharpest decline among major Asian markets.

The Kospi Index dropped 6.6% to 6,816.70, as investors reacted negatively to both domestic monetary tightening and weakness in semiconductor shares.

The Bank of Korea (BOK) surprised markets by raising its benchmark interest rate—the first increase since 2023—in an effort to contain inflationary pressures fuelled by rising global energy prices and the ongoing conflict in the Middle East.

Higher interest rates generally reduce liquidity and increase borrowing costs, making growth-oriented technology companies less attractive to investors.

AI and Semiconductor Stocks Face Heavy Selling

Technology stocks remained under significant pressure as investors booked profits following an extended rally driven by enthusiasm surrounding artificial intelligence.

Major semiconductor companies recorded steep losses.

South Korean Technology Stocks

• SK Hynix declined 11.2%

• Samsung Electronics fell 8.2%

The weakness reflected concerns that AI-related valuations had become stretched after months of strong gains.

Market participants also preferred reducing exposure ahead of key earnings announcements from global chip manufacturers.

Japanese Equities Extend Decline

Japan's Nikkei 225 index fell 2.9%, with semiconductor and technology companies accounting for most of the losses.

Several leading companies posted significant declines.

Major Losers in Japan

• Kioxia dropped 13.5%

• Tokyo Electron declined 5.2%

• Advantest fell 5.6%

• SoftBank Group lost 6.4%

SoftBank's decline reflected broader weakness across AI-related investments, given its substantial exposure to technology companies through its investment portfolio.

Taiwan Markets Await Key Earnings from TSMC

Taiwan's benchmark Taiex Index slipped 0.3% as investors remained cautious ahead of the quarterly earnings announcement by Taiwan Semiconductor Manufacturing Company (TSMC).

TSMC's financial results are widely regarded as an important indicator for the global semiconductor industry because the company manufactures advanced chips for many of the world's leading technology firms.

Investors will closely watch the company's commentary on:

• Artificial intelligence demand

• Advanced chip orders

• Capacity expansion

• Data centre investments

• Future industry outlook

The guidance provided by TSMC is expected to influence technology stocks worldwide.

Hong Kong Defies Regional Weakness

Unlike other Asian markets, Hong Kong ended the day with strong gains.

The Hang Seng Index advanced 1.7%, supported by a rally in technology shares.

Alibaba surged 4.4% after China's cyberspace regulator approved Apple Intelligence for use on iPhones within China.

Alibaba confirmed that its Qwen large language model will power Apple's AI services for Chinese users, boosting optimism surrounding China's artificial intelligence ecosystem.

The development also reinforced investor confidence in Chinese technology companies following recent regulatory improvements.

Chinese Equities Continue to Face Economic Concerns

Despite gains in Hong Kong, mainland Chinese equities remained under pressure.

The Shanghai Composite Index declined 0.9% amid continuing concerns over:

• Slower economic recovery

• Weak domestic consumption

• Property market challenges

• Export uncertainty

• Manufacturing slowdown

Investors remain cautious as policymakers continue introducing measures to stabilise economic growth.

Australian Shares Edge Lower

Australia's S&P/ASX 200 slipped 0.2%, weighed down by weakness in technology and mining stocks.

Although commodity prices remained relatively stable, investor sentiment across global equity markets remained cautious due to geopolitical uncertainty.

Indian Markets Display Relative Resilience

India stood out as one of the better-performing markets in the region.

The Sensex gained approximately 0.3%, supported by:

• Strong domestic institutional inflows

• Positive earnings expectations

• Strength in information technology stocks

• Stable macroeconomic fundamentals

India's relatively resilient performance reflects continued confidence in the country's economic growth prospects despite global volatility.

Oil Prices Ease but Remain Elevated

Crude oil prices declined modestly during Thursday's trading session.

Brent Crude

• $84.55 per barrel

• Down 0.4%

West Texas Intermediate (WTI)

• $79.34 per barrel

• Down 0.2%

Although prices softened, crude continues to trade well above levels seen earlier this year due to geopolitical tensions in the Middle East.

Middle East Conflict Keeps Energy Markets on Edge

Energy markets continue to monitor developments involving the United States and Iran.

Recent military exchanges have raised concerns regarding the security of the Strait of Hormuz, one of the world's most important oil transportation routes.

Commodity analysts note that tanker traffic through the region remains disrupted, increasing the risk of supply shortages if tensions escalate further.

Higher oil prices could contribute to:

• Rising inflation

• Increased transportation costs

• Pressure on central banks

• Slower global economic growth

Wall Street Closed Higher Overnight

Despite weakness across Asia, US markets ended Wednesday's session in positive territory.

Major US Indices

Investor sentiment improved after:

• Softer-than-expected US inflation data

• Strong corporate earnings

• Positive results from major financial institutions

BlackRock Impresses with Strong Quarterly Results

Global asset management giant BlackRock gained 6.6% after reporting better-than-expected quarterly earnings.

The company's performance highlighted:

• Strong assets under management

• Healthy client inflows

• Stable fee income

• Continued resilience in financial markets

The results helped support broader investor sentiment in the United States.

Currency Market Remains Stable

Currency markets remained relatively calm despite global uncertainty.

Key currency movements included:

• US Dollar: Around 162.09 Japanese Yen

• Euro: Approximately $1.1467

Investors continue monitoring central bank policy expectations and geopolitical developments for future currency direction.

Key Factors Driving Global Markets

Several themes continue influencing investor sentiment worldwide.

Artificial Intelligence Valuations

Technology stocks remain vulnerable after substantial gains over the past year.

Semiconductor Earnings

Upcoming earnings from major chip manufacturers are expected to determine the sector's near-term direction.

Central Bank Policies

Interest rate decisions remain one of the biggest drivers of equity valuations.

Geopolitical Risks

The conflict in the Middle East continues to affect commodity prices and market volatility.

Corporate Earnings

Strong earnings remain essential for sustaining current equity valuations.

What Investors Should Monitor

Market participants are expected to closely follow:

• TSMC quarterly earnings

• Global semiconductor demand

• Bank of Korea policy outlook

• US Federal Reserve commentary

• Developments in the Middle East

• Oil price trends

• Corporate earnings from global technology companies

These factors are likely to determine market direction over the coming weeks.

Outlook

Asian markets remain caught between optimism surrounding long-term artificial intelligence growth and near-term concerns over valuations, rising interest rates and geopolitical uncertainty. The sharp correction in South Korea's technology-heavy market highlights how quickly investor sentiment can shift when monetary tightening coincides with profit booking in high-growth sectors. At the same time, Hong Kong's strength demonstrates that positive company-specific developments can still drive selective opportunities within the technology space.

Going forward, investors are expected to remain highly focused on semiconductor earnings, central bank decisions and geopolitical developments. While short-term volatility is likely to persist, structural themes such as artificial intelligence, digital transformation and advanced semiconductor manufacturing continue to underpin the long-term investment case for the global technology sector.