Indonesian stocks were set to post their worst month in nearly two decades on Friday, after a downgrade warning from MSCI deepened a market rout that left the rupiah hovering near record lows.
While the moves prompted Jakarta to unveil fresh market-support measures, investors remain cautious, with analysts warning that volatility could persist until there is greater clarity on Indonesia's status on the index and the direction of fiscal policy.
The country's benchmark stock index has fallen 18% this month and the currency is lingering near the record lows hit in early June while bond yields are near six-year highs.
Meanwhile, MSCI's emerging Asia equities index fell 1.6% on Friday, dragged by a 3.5% drop in South Korea's KOSPI and a 2.5% decline in Taiwan's benchmark index.
Markets fell as disappointing earnings from technology heavyweights hastened a rotation out of AI-linked trades as investors increasingly scrutinize whether companies can sustain the heavy spending needed to fund their AI ambitions.
Samsung Electronics extended losses to trade 3% lower, a day after reporting a 15-fold jump in chip profit but offering no fresh shareholder-return measures and an outlook that disappointed investors. Shares of rival SK Hynix fell 7.1%.
The tech-heavy Nasdaq shed more than 1% overnight after shares of Google parent Alphabet tumbled on weak results and a sharp increase in spending.
"I wouldn't say investors are abandoning the AI trade just yet. The demand is still there, but the market is becoming a lot more selective about where it puts its money," said Dilin Wu, research strategist at Pepperstone.
"And after such a strong run in AI-related stocks, there's much less room for disappointment."
Elsewhere, Singapore stocks and the Philippine benchmark index slipped about 0.2% and 0.4%, respectively.
The dollar index, which measures the US currency against a basket of peers, was a shade weaker at 101.72, lending some support to the regional currencies.
The Malaysian ringgit appreciated to 4.046 against the dollar, its strongest level since September 8.
The South Korean won rose to 1,332.51 a dollar, on track for a fourth consecutive monthly gain in October. The won has benefited from booming semiconductor exports and AI-related investment. The currency has staged a four-month rally after sliding more than 7% in the first half of the year.
Elsewhere, the Bank of Japan kept its interest rates steady on Friday, declaring victory in a nearly 14-year battle to hit its price target and signalling vigilance against inflationary risks, suggesting scope to hike borrowing costs as early as December.
HIGHLIGHTS:
** Singapore third-quarter layoffs at highest level since 2020
** Philippines' trade deficit widens to $5.15 billion in September
** Crypto exchange Binance freezes assets after $6.3 billion security breach - Reuters
