KOSPI leads declines as Asian stocks diverge amid mounting AI concerns

Monday trading sees Asian stock markets move in different directions.
Disappointing results from major US technology companies intensified concerns over AI's outlook, putting pressure on the KOSPI and Nikkei.
At its October meeting on Friday, the BoJ left interest rates unchanged while signalling further increases.

Asian equities show a broadly mixed performance on Friday. Unease over Artificial Intelligence (AI)-related investment is putting pressure on regional markets. Major technology shares in South Korea and Japan are suffering substantial declines.

A 5.20% decline to 5,630 puts the benchmark KOSPI at the forefront of the day's losses across South Korean stocks. At the time of writing, Samsung shares were 5.70% lower and SK Hynix had fallen 1.60%. Earlier this week, SK Hynix reported record quarterly sales of 104.6 trillion won.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A 2.55% fall took Japan's benchmark Nikkei 225 to 63,020. Following a two-day monetary policy review that ended on Friday, Bank of Japan (BoJ) board members kept the short-term interest rate at 1.25%. Markets had expected the decision.

For the first time since adopting its 2% target in 2013, the BoJ assessed Japan's underlying inflation as “generally consistent” with that target.

A 2.42% decline left Taiwan's Taiex at 45,255. Higher borrowing costs, substantial AI expenditure and some earnings below expectations are causing concern among investors.

A 0.30% drop took the SHANGHAI, China's main stock market index, to 3,640. By contrast, the Hong Kong Stock Exchange gained 1.70% to 23.345, while the Shenzhen Stock Index lost 0.60% to 11,075.

Asian Equities: Key Questions

Asia's Principal Stock Market Indices

Around 70% of global economic growth comes from Asia. The region is home to several major equity indices. In its developed economies, prominent benchmarks include South Korea's Kospi and Japan's Nikkei, which covers 225 companies listed on the Tokyo stock exchange. China's three key indices are the Hong Kong Hang Seng, Shanghai Composite and Shenzhen Composite. India, a major emerging economy, is also attracting equity investors, who are increasingly buying shares in companies included in the Sensex and Nifty indices.

Key Sectors Across Asian Equity Markets

Sector exposure varies across Asia's major economies, each of which has distinct areas to watch. Indices in Japan and South Korea are dominated by technology companies, a pattern increasingly seen in China too. In Hong Kong and Singapore, both regarded as major financial hubs, financial services lead the stock markets. China and Japan also have sizeable manufacturing sectors, particularly in cars and electronics. Meanwhile, expanding middle classes in countries such as China and India are raising the profile of retail and e-commerce businesses.

Principal Drivers of Asian Equities

The combined results of constituent companies, disclosed in quarterly and annual earnings reports, are the primary driver of Asian equity indices, although many other influences matter. These include national economic fundamentals, central bank decisions and government fiscal policies. Political stability, technological advances and the rule of law can also affect share markets. US equity index performance is another influence: Asian markets frequently follow Wall Street's overnight direction. Broader market risk appetite matters as well, since equities are regarded as riskier than alternatives such as fixed-income securities.

Regional Risks in Asian Stock Markets

Beyond the inherent risks of equity investing, Asian stocks carry regional risks that investors need to consider. Political systems across Asia range from full democracies to dictatorships. As a result, political stability, transparency, the rule of law and corporate governance requirements can differ substantially. Trade disputes, territorial conflicts and other geopolitical developments can trigger stock market volatility, as can natural disasters. Exchange-rate movements can also affect Asian equity market valuations. Export-oriented economies are particularly exposed: a stronger currency tends to hurt them, while a weaker one makes their products cheaper overseas and generally benefits them.