South Korea’s Kospi index fell about 7.5 percent shortly before closing, despite a decision to temporarily halt trading. Thursday’s drop brings the tech-heavy stock market, which includes giants SK Hynix and Samsung, down nearly 20 percent over the past month.
The Tokyo Stock Exchange was also dragged down, with the broad Topix index falling 2.3 percent. Two major factors are behind the declines: increased expectations of interest rate hikes in the US and uncertainty over financing for AI companies. Both are also connected, says Elisabeth Kopelman, a US economist at SEB:
“If you are worried about interest rates, you will also be worried about financing,” she says.
Fell heavily
One company now causing concern is CoreWeave, which specializes in buying advanced computer chips and then renting them out. The company’s shares fell sharply during Wednesday’s trading on Wall Street.
US inflation figures released earlier on Wednesday were also higher than expected, leading market participants to increasingly expect an interest rate hike as early as October.
“We still expect another interest rate hike in December, but we have to say that the risks still point to rates not stopping there, but rising again, in that case in 2027,” says Kopelman.
May need to be careful
At the same time, Elisabeth Kopelman points out that a very weak stock market could force the US central bank, the Federal Reserve, to proceed more slowly with interest rate increases.
“If the unrest in the stock markets persists, it could be another reason for the Federal Reserve to pause in October and then see how to approach December,” she says.
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