Asian equities saw their sharpest drop in months on Wednesday, led by a 6% plunge in South Korea, as investors pulled back from overheated tech stocks on valuation worries, though most markets later pared losses.
The MSCI index of emerging Asia equities and a broader index tracking Asia equities excluding Japan were down over 1% in their worst intraday decline since the early April "Liberation Day" tariff turmoil.
Shares slid after the CEOs of Morgan Stanley and Goldman Sachs cast doubt on whether the recent AI-fueled rally and record-high valuations could be sustained.
Traders hit regional markets hard early on Wednesday, with South Korea’s KOSPI seeing its steepest intraday fall since August last year before closing just above the key 4,000 level. The KOSPI has surged a staggering 80% since April, with more than a third of the gains coming last month.
Chipmaker Samsung Electronics has risen 90% this year, while peer SK Hynix has more than tripled. Those gains have firmly positioned the index among the top-performing equity markets globally this year.
Taiwan's benchmark index has advanced 20% this year, driven mostly by a 40% rally in TSMC shares. But it all came to a head on Wednesday as caution over an overheated rally, stretched valuations, a reassessment of Fed cuts and caution from Wall Street bigwigs triggered the steepest sell-off in months.
"This isn't a broad market crash but more of a healthy recalibration in overheated sectors," said Tareck Horchani, Head of Dealing, Prime Brokerage at Maybank Securities.
"While short-term sentiment may remain fragile, we expect the market to stabilise as earnings normalise and macro visibility improves, particularly if U.S. rate guidance or China demand provide a clearer backdrop".
On Wednesday, South Korea's KOSPI fell 6.2% to drop below the psychologically key 4,000 level, marking its worst intraday decline since August last year. The benchmark index ended the session down 2.9%. The South Korean won extended losses, weakening 0.7% to its lowest point since mid-April.
Taiwan's stocks shed 2.6% to fall by the most in three weeks. Its dollar weakened for the sixth consecutive session to hit its lowest point since early May.
In Southeast Asia, Singapore's FTSE Straits Times index slipped more than 1%, while Malaysia's KLCI lost 0.6%. Stocks in the Philippines shed 1.8%.
Most currency markets in the region were largely on the back foot against a steady U.S. dollar. The Philippine peso lost 0.5% and the Indonesian rupiah inched 0.2% lower, continuing to hover around a six-week low.
HIGHLIGHTS:
** Yield on Indonesia's 10-year bonds ticks higher to 6.166%
** China eyes $4 billion dollar bond, term sheet shows, orders top $65 billion
** Indonesia Q3 GDP growth slows slightly to 5.04% ahead of end-year stimulus measures - Reuters
