Asian indexes fall as data-center concerns weigh on chip shares

Taiwan deploys stabilization fund as South Korea eases brokerage collateral rules

Asian stock indexes recorded sharp declines as investors worried that the U.S. data-center build-out could slow following the midterm elections, The Wall Street Journal reported. South Korea’s Kospi fell nearly 12% last week, while Japan’s Nikkei Semiconductor Stock Index dropped 54% from its June high. Taiwan mobilized the National Financial Stabilization Fund and restricted short selling, while South Korea temporarily loosened collateral rules for brokerages. On Monday, the Kospi stayed roughly flat and Taiwan’s Taiex gained roughly 5% after authorities acted to curb volatility.

The Kospi was roughly 45% below its June peak, dragged down by Samsung Electronics and SK Hynix, which fell about 16% and 20%, respectively, last week. Japan’s benchmark Nikkei had shed almost 20% since its June high. Over the same period, the Nikkei Semiconductor Stock Index fell 54%, while shares of flash-memory maker Kioxia Holdings dropped nearly 37% last week.

Taiwan mobilized the National Financial Stabilization Fund, which has around $15 billion at its disposal, to help stabilize the stock market. On Monday, the country’s market regulator imposed curbs on short selling, helping boost Taiwan Semiconductor Manufacturing Co. shares. South Korea’s Finance Ministry temporarily loosened collateral rules for brokerage firms to stem excessive selling.

Asian stock markets have been volatile this year. The AI build-out fueled demand for chips and other technology made in Asia, sending shares in SK Hynix, Samsung Electronics, Taiwan Semiconductor Manufacturing Co. and Japan’s Kioxia Holdings soaring. Individual investors in South Korea, China, Japan and Taiwan piled in, hoping to make a quick fortune. But those gains are now unraveling fast on worries that the U.S. data-center build-out could slow following the midterm elections. That has sent investors through another volatile stretch and left officials growing worried.

Choi Jin-wook, a 35-year-old office worker in Seoul, bought $37,000 worth of SK Hynix shares in July, thinking prices had to bounce back from a summertime selloff. Instead, his holdings have halved as investors worry the artificial intelligence build-out will slow. Although Choi had grown accustomed to South Korea’s market volatility this year, last week’s plunge was painful; he remained hopeful that SK Hynix, the world’s second-largest memory-chip maker, would eventually recover. “It feels like we’ve hit every possible bad news at this point,” he said.

In Japan, 17-year-old Minami Kamiya is part of her high school’s investment club. One of their coaches, a prominent activist shareholder in Japan, contributes to a 200,000-yen starting stake for each student, or around $1,200, so each can craft an investment portfolio. Since the U.S. midterms, some of Kamiya’s clubmates have been posting messages in their Slack channel after watching Kioxia fall. “There were people freaking out,” she said. Kamiya instead stayed with stocks such as food giant Nissin, which she picked partly due to her love of instant noodles.

The volatility has extended beyond technology stocks. Rio Negishi, a 22-year-old student at Japan’s Meiji University, had not put much money into tech stocks but still saw his portfolio lose about $38,000, or around 30% of its value. “Right now, the next step—or rather, where to move the funds—is quite unclear,” he said. “I’ve sold off some of my holdings, but now I have no idea where to reinvest the capital.”

This year, Lee Ka-young, a 25-year-old software developer in Seoul, posted short videos on Instagram giving stock tips to mom-and-pop investors. Since the crash in the Kospi this summer, followers have begun to leave comments such as “Help us” and “What are we supposed to do?” Lee’s average monthly views have fallen to a fifth of what they were this summer, and Lee’s own stockholdings are down 30% from the peak to about $6,000.

Lee still believes stocks remain a decent investment and feels solidarity with other investors stuck in losing positions. “I thought this time would be different,” Lee said. “But I’ll keep investing, with the mindset of passing my shares down for generations.”

For investors just beginning to invest, the market swings are providing an early lesson.

The declines have piled pressure on South Korean President Lee Jae Myung, whom The Wall Street Journal described as one of the biggest cheerleaders of the country’s stock-market boom. He warned last month that “a correction was inevitable,” but opposition figures have criticized the government’s policies as losses have mounted. Seoul Mayor Oh Se-hoon wrote on Facebook on Sunday, “The Lee government’s reckless arrogance in thinking it could move the market has ultimately opened the gates of hell.”

Min Gyeong-gwon, who heads an activist group representing local individual investors, said he had lost faith in the government after experiencing two stock-market crashes. “It was the president who laid out a bright future for Korean stocks at the start of the year. People went in with confidence because we believed him,” he said.