South Korea's KOSPI triggers circuit breaker in tech-led selloff

SINGAPORE: Asian stocks plunged Thursday (Oct 15) as tech firms suffered another painful rout, as a quicker-than-expected increase in US consumer price inflation fuelled expectations the Federal Reserve will have to ramp interest rates higher.

Seoul and Tokyo bore the brunt of the selling as traders bailed out of once-imperious chipmakers, though the selling was heavy across the region, tracking sharp losses on Wall Street.

As of 12.30pm Singapore time, Seoul's Kospi had plunged more than 7 per cent, with SK hynix sinking more than 10 per cent and Samsung more than 10 per cent.

And in Tokyo, the Nikkei 225 shed more than 5 per cent as Kioxia also dived more than 11 per cent and Advantest plunged over 13 per cent. Tech investment titan SoftBank lost more than 9 per cent.

Taipei lost more than 3 per cent as market-heavyweight TSMC gave up around 3 per cent.

The selling came after many tech firms had clawed back some of the huge losses sustained in a summer rout that came on the back of worries about elevated valuations and questions over when firms would see returns on their colossal investments.

Hong Kong, Shanghai and Jakarta were also in negative territory.

In Singapore, the Straits Times Index fell 0.9 per cent. Chip-testing equipment maker AEM Holdings lost 9 per cent, while UMS Integration dropped 9 per cent and Frencken declined 6.4 per cent.

Markets, already struggling with concerns about the outlook for the AI investment boom, were stung after data showed the US consumer price index hit 3.7 per cent in September, sharply up from the previous month and more than the 3.6 per cent forecast.

The reading is the highest in five months and was largely driven by the surge in energy costs caused by the more than seven-month Iran war, which saw Tehran effectively choke off the Strait of Hormuz, through which a fifth of global crude passed.

Gasoline costs accounted for more than half of the monthly CPI jump, surging 9.1 per cent in September.

All three major American indices dropped overnight but the tech-heavy Nasdaq suffered the deepest declines, losing nearly 2 per cent.

The CPI data lifted expectations of interest rate hikes from the Federal Reserve over the course of the year ahead, possibly as soon as later this month. Fed funds futures are now pricing an implied 31.6 per cent probability of a 25-basis-point hike at the US central bank's next two-day meeting on Oct 28, compared to a 22.1 per cent chance a day earlier, according to the CME Group's FedWatch tool.

"This CPI report is a headache for the Fed, which had been indicating a willingness to pause this month," said Neil Wilson at Saxo Markets, referring to several board members who had suggested they favoured a go-slow approach to assess last month's lift.

"Markets too had all but priced out a hike later this month but repriced for the Fed to move a bit quicker after US inflation came in a little hotter than expected."