Asian stock markets turned lower on Wednesday as a fresh wave of selling in semiconductor shares reverberated through South Korea and Japan, while elevated U.S. bond yields and persistent tensions in the Middle East kept investors wary of richly valued growth names.
The MSCI AC Asia Pacific index declined roughly 2%. U.S. futures tracked softer moves from Wall Street, with Nasdaq 100 futures down about 0.2% and S&P 500 futures off around 0.1% following an overnight technology-led retreat. The Philadelphia Semiconductor Index plunged 5.6% in U.S. trade, marking its largest one-day drop since late July, with Micron Technology falling 7% and Nvidia sliding 2.3%.
Bond market developments added to the pressure. Long-dated U.S. Treasury yields remain elevated after a global bond selloff pushed the 30-year yield to 5.3371%, its highest level since 2007, while the 10-year Treasury yield was trading near 4.69% in Asian hours. Higher borrowing costs increase the discount rate applied to future earnings and reduce the appeal of richly valued technology stocks.
Investors were also awaiting the Federal Reserve's July meeting minutes, due later Wednesday, for further clues on policymakers' assessment of persistent inflation. The U.S. is planning to sell $16 billion of 20-year Treasury debt, and a lack of progress in the Iran conflict has kept Brent crude above $90 a barrel, factors that market participants said were contributing to an environment of caution.
KOSPI plunge erases rebound
South Korea's KOSPI tumbled 5.5% to 6,495.1 points, having earlier dropped as much as 6.4%. The index had gained more than 2% on Tuesday, extending a rebound that began after a late-July rout, but heavy selling in semiconductor names undercut those earlier gains. SK Hynix plunged 8.4% and Samsung Electronics fell 7.3%.
The steep decline in the heavily chip-weighted index briefly triggered a sidecar program-trading halt, a market mechanism intended to temporarily cool trading when selling becomes unusually intense. The KOSPI's concentration in large semiconductor names makes the index particularly sensitive to swings in that industry cycle.
Market participants noted that while the broader artificial intelligence growth narrative remains intact, investors were increasingly reluctant to pay a premium for that theme in the face of rising rates and profit-taking. A Bank of America survey cited in market commentary showed 59% of fund managers are hedging AI downside risk by rotating into value, cyclical and defensive sectors, more than double the level recorded in July, and that almost two-thirds of managers want clearer evidence of AI monetization before adding to AI exposure.
Japan and China tech stocks fall; commodity and yield backdrop adds strain
In Japan, the Nikkei 225 fell 2.4% and the TOPIX dropped 2.7%. Technology-related declines were led by Kioxia, which slid 8.9%, while TDK lost 4.1% and Sony declined 1.02%.
On the Chinese mainland, the Shanghai Shenzhen CSI 300 fell 2.4% and the Shanghai Composite lost 2%. Hong Kong's Hang Seng was roughly unchanged on the session.
Chinese internet and device-related names saw mixed outcomes. Baidu plunged 12.5% after quarterly revenue missed expectations amid weak advertising demand. Xiaomi bucked the broad trend, rising 6.4% despite reporting a sharp drop in second-quarter adjusted profit; market commentary highlighted investors' focus on Xiaomi's faster-growing electric vehicle and AI segments, with EV revenue up 15.9%.
In a notable outlier, Unitree Robotics soared nearly sixfold in its Shanghai market debut after an IPO that was more than 8,000 times oversubscribed by retail investors.
Other regional moves and central bank watch
Australia's S&P/ASX 200 fell 0.3% and Singapore's FTSE Straits Times index lost 0.36%. India's Nifty 50 opened about 0.3% lower, while Indonesia's Jakarta Composite slipped 0.6%.
Central bank comments and policy calendars also featured. Australia's S&P/ASX 200 moved lower after Reserve Bank of Australia Deputy Governor Andrew Hauser warned rates may need to rise again if inflation risks crystallize. In Southeast Asia, Bank Indonesia was scheduled to announce its policy decision later Wednesday and was widely expected to keep rates unchanged.
Market context and investor positioning
Analysts and investors in the session cited three related pressures: a concentrated semiconductor selloff that weighed on indices with large chip exposures, rising U.S. Treasury yields that raise the hurdle rate for growth stock valuations, and geopolitical risks keeping oil prices elevated above $90 a barrel. Those dynamics appear to be prompting rebalancing away from high-multiple technology and AI-exposed names toward more value, cyclical and defensive areas of the market, according to the survey data referenced by market participants.
With Fed minutes and sizable U.S. Treasury issuance scheduled, market watchers said attention would remain on how policymakers and the bond market react to ongoing inflation and economic signals in the near term.