Sharp Declines in Seoul and Tokyo Markets Amid Chip Stock Sell-Off and South Korea Rate Hike
Asian stock markets experienced significant drops, particularly in Seoul and Tokyo, driven by a steep sell-off in semiconductor shares. SK Hynix shares plunged 11% in Seoul, while Samsung fell 8.4% and Sanmi Semicond lost 7%. In Tokyo, Kioxia dropped 14.5%, Sumco declined 8.3%, Renesas fell 6.3%, and Advantest lost 5.8%. The technology holding giant SoftBank also fell 7%. Conversely, Hong Kong markets showed gains with Xiaomi up 5.3%, Baidu rising 4.4%, and Alibaba increasing 4.9%, although Lenovo declined 3.7%. These declines followed a sharp drop in US chip stocks, including Micron and Sandisk, which fell 8% the previous evening.
In South Korea, the central bank raised its interest rate by 25 basis points to 2.75%, marking the first hike since January 2023. This move responds to rising inflationary pressures, with annual inflation reaching 3.2% in June, the highest since 2023. The bank warned that recent high performance bonuses in major tech firms could lead to broader wage increases, further fueling inflation. The central bank also revised its inflation forecast for 2026 upward to 2.7%, noting core inflation is expected to remain slightly above previous estimates. Despite the currency weakening to a 17-year low against the dollar, South Korea's economy showed strength with a 3.8% annualized GDP growth in Q1, the highest since late 2021.
Meanwhile, United Airlines reported second-quarter earnings of $805 million, a 17% decline year-over-year, with adjusted earnings per share of $1.99 beating analyst expectations of $1.88. Revenues rose 16% to $17.67 billion, slightly above forecasts. However, the airline issued a disappointing forecast for the current quarter, projecting adjusted EPS between $2.50 and $3.50, below the market expectation of $3.60. Following the report, United Airlines shares fell 2.4% in after-hours trading.
Overall, the combination of disappointing corporate forecasts, ongoing inflation concerns, and a cautious central bank stance contributed to the negative sentiment across Asian markets, particularly impacting the semiconductor sector and related technology stocks.
