Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
AÇÃO
South Korean and Japanese stocks got hammered yesterday, as investors fled from an increasingly fragile regional semiconductor market. The Korean Kospi index fell over 9% at one point on Thursday, triggering yet another circuit breaker – the tenth of the year so far – before settling for a more modest 7.5% daily loss. The index has fallen 40% from its record high registered in June and yesterday marked the lowest daily close since April. Samsung and SK Hynix, which together account for half the index, lost 9.5% and 11% respectively. The selloff in semiconductors hit Japanese markets just as hard; Tokyo Electron suffered an 8% loss; Kioxia Holdings fell over 12%; Advantest suffered a 15% drop; the list goes on. The Nikkei 225, having a greater breadth of industry to draw from than its Korean counterpart, only incurred a 5% loss when all was said and done, which is nevertheless one of the worst drops in the index’s history. Over in Taiwan, TSMC also experienced minor selling pressure, dragging the company to a 2% loss, despite publishing record-breaking profits in the third quarter.
Markets are beginning to worry about the long-term viability of the semiconductor trade, not necessarily in terms of demand but more so in terms of profitability. The sector is expected to face increased competition from China and other parts of the world over the coming years, expanding the pool of manufacturers vying for the same buyers. On top of that, recent inflation data in the US points to elevated rates on the dollar, which affects local exchange rates and borrowing costs. Most raw materials still need to be purchased in dollars, directly impacting the bottom line of chipmakers, to say nothing of the increase in energy and shipping costs.
International investors are well aware of the structural problems facing the South Korean stock market and many are now looking for the exit. Foreign capital poured into Korean semiconductor firms earlier in the year, which helped to propel the Kospi index to a colossal 120% rise between January and June, but those same pools of money are currently being rotated back out. Domestic demand is clearly insufficient to prop up prices any longer, as evidenced by the 40% drawdown in the Kospi index.
US markets have completely shrugged off this week’s CPI and PPI readings, despite the inflation data itself being absolutely terrible. Wednesday’s CPI data revealed a sizeable uptick in both headline and core inflation, while Thursday’s PPI report indicated a massive rise in wholesale inflation to 6.3% year-over-year. Markets completely absorbed the bad news, so much so that interest rate expectations barely flinched. Everyone knows that rate hikes on the dollar are coming and yesterday’s awful PPI figures do not make such adjustments any more likely than they already were. The dollar currency index actually dropped on Thursday, while US equities rose higher, despite the contagious selloff in the tech sector. The Dow Jones and S&P 500 gained 1.1% and 0.3% respectively, while the Nasdaq-100 remained flat on the day. US growth remains strong, giving the economy far more leeway to tolerate the problems that usually come with sticky inflation. Yesterday’s retail sales figures smashed expectations, showing a 6.3% year-over-year increase in activity, further diminishing the impact of the rough inflation print. In a fireside chat this morning in Bangkok, Fed Chairman Kevin Warsh soothed investor fears even further by highlighting robust structural growth in the US economy and refusing to panic over the recent PPI release.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
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