The plunge in American chip stocks and cautious investor behavior ahead of the U.S. midterm elections significantly impacted Asian markets. The MSCI Asia Pacific Index dropped 1.2%, with South Korea leading regional losses. Meanwhile, the U.S. index tracking chip stocks has seen a staggering 12% decline over the last three sessions, and the Nasdaq 100 slipped into technical correction territory with a 10% drop from its peak.
Broad Declines in Major Asian Markets
South Korea’s Kospi index plummeted by 4% to 5,624.02 points, with major companies like Samsung Electronics and SK Hynix losing over 4% in value. Taiwan’s benchmark index also suffered losses exceeding 3%. Additionally, Indonesia’s market declined by 2%, while the Shanghai Composite Index retreated by 0.71%. In South Korea, the central bank anticipates headline inflation to remain above the 2% mark in November, following a reported 2.8% in October, as cost increases seep into areas such as travel, dining, and electronics.
China Boosts Support for Market, Halts Yuan Rally
The People’s Bank of China moved to make a stock buyback and share increase financing program permanent by reducing the annual interest rate on funds provided to banks from 1.25% to 1%. The Chinese securities regulator plans to initiate a third round of asset swaps involving liquid government bonds to bolster market funding. A total of 31 intermediaries and funds made bids totaling 100 billion yuan for this one-year, extendable program.
Officials are also considering measures to relax collateral requirements in margin trading and encourage pension and insurance funds to invest more in the stock market. “Given the ongoing adjustments in the real estate sector and significant sales in major tech firms leading the CSI 300 index to drop 8.5% in October, new measures may have limited impact,” said Fu Zhicheng, Investment Director at Shanghai Qingzhou Investment Management.
The central bank also acted to slow the yuan’s appreciation by requiring banks to hold more foreign exchange reserves. The yuan, having depreciated by up to 0.4% against the dollar, dropped to a rate of 6.6728, ending its 13-day rally—the longest since 1996.
Oil Exports Rebound Amid Midterm Election Focus
Data compiled by Bloomberg show that in October, combined crude oil exports from Saudi Arabia, the United Arab Emirates, Iraq, and Kuwait rose approximately 10% from the previous month, reaching 15.53 million barrels per day. Saudi Arabia’s exports alone saw a 13% increase to 7 million barrels per day, while Iraq’s went up 9.5% to 3.35 million barrels. The UAE reached 3.74 million barrels per day, with Kuwait increasing exports by a third to 1.44 million barrels. Notably, no shipments of crude or condensate from Iran were recorded in two consecutive months due to U.S. maritime sanctions.
Dubai’s crude future contracts for November fell beneath December’s for the first time since July, indicating eased supply tensions with a $2 per barrel discount. Increasing exports and potential renewed talks between the U.S. and Iran contributed to Brent and WTI prices falling nearly 7% on Monday. Industry observers suggest the export recovery is gradual, with OPEC and allies set for a meeting on November 29 to discuss production targets for 2027.
Amid speculation of resumed U.S.-Iran discussions, gold, which rose 1.9% in the last session, shed 6.8% throughout October as investors looked to liquidate positions to cover losses in technology stocks. As of the article’s preparation, gold traded at $3,928 per ounce, with Brent crude at $105.83 per barrel and Bitcoin valued at $76,619.
Global Markets Brace for U.S. Midterm Outcomes
The sell-off of chip stocks in the U.S. reverberated across South Korea and Taiwan, while efforts by Chinese authorities to cheapen stock buyback financing failed to arrest declines in Shanghai. The rebound in Gulf oil exports and the prospect of resumed U.S.-Iran negotiations exerted downward pressure on oil prices, easing inflation concerns and supporting gold. Equity markets, however, remained impacted by tech stock declines, illuminating the vulnerabilities. Investors are now shifting focus to the U.S. midterms, where predictions favor Democrats gaining control of the House of Representatives, but Senate outcomes remain uncertain. A sweep by Democrats could lead to tighter oversight of AI firms and data centers. Conversely, Republican control might lead to policy shifts towards tax cuts and deregulation, potentially supporting AI and infrastructure investments, though they could amplify budget deficit concerns. Post-election, regulatory measures for tech stocks alongside fiscal and borrowing policies concerning bonds and dollars will likely take center stage.
