Asian equity markets saw significant declines as US chipmakers’ shares sold off sharply, prompting caution among investors ahead of the US midterm elections. The MSCI Asia Pacific Index fell 1.2%, with South Korea leading regional losses. Over the past three sessions, the US chip sector index recorded a 12% drop, while the Nasdaq 100 has now retreated 10% from its peak, officially entering correction territory.
Tech stocks pull down major Asian indices
South Korea’s Kospi dropped 4% to 5,624.02 points, as shares in Samsung Electronics and SK Hynix each lost more than 4% in value. Taiwan’s benchmark index also recorded losses of over 3%. In Indonesia, the main index slid 2%, and Shanghai’s Composite Index closed 0.71% lower. The Bank of Korea reported October headline and core inflation at 2.8% year-over-year and projected headline inflation would remain on the upper end of 2% in November. The central bank highlighted that accumulated costs were affecting travel, dining out, and electronics prices.
| Stock Index | Drop (%) |
|---|---|
| Kospi (South Korea) | 4.0 |
| Taiwan Index | 3.0+ |
| Indonesia | 2.0 |
| Shanghai Composite | 0.71 |
China steps up support for stock market, yuan’s rally halts
The People’s Bank of China made permanent a funding program for listed companies to finance share buybacks and capital increases, and reduced the annual interest rate on these funds from 1.25% to 1%. China’s securities regulator is also preparing for a third round of an initiative that allows institutions to swap assets for liquid government bonds to facilitate market funding. Thirty-one brokerages and funds applied for a total of 100 billion yuan in the latest phase of the one-year, extendable program.
Mini dictionary: The People’s Bank of China is China’s central bank, responsible for monetary policy, financial regulation, and currency management.
Officials are also considering measures to ease collateral requirements in margin trading and steps to encourage increased stock market investments by pension and insurance funds. These moves follow an 8.5% drop in the CSI 300 Index in October amid real estate sector weakness and technology stock declines. Fu Zhicheng, Investment Director at Shanghai Qingzhou Investment Management, commented that support programs have been active since early 2024 but anticipated their effect could remain limited.
The central bank also called on commercial banks to hold more foreign currency reserves in an attempt to slow the yuan’s appreciation. The yuan weakened 0.4% to 6.6728 against the US dollar, ending its 13-day streak of gains, the longest since 1996.
Oil exports rebound, US sanctions keep Iranian flows stalled
Tanker tracking data compiled by Bloomberg showed that total crude oil exports from Saudi Arabia, the United Arab Emirates, Iraq, and Kuwait rose approximately 10% in October from the month prior, reaching 15.53 million barrels per day. Exports approached pre-conflict levels last seen in February. Saudi Arabia shipped 7 million barrels per day, a 13% jump, while Iraq’s exports increased 9.5% to 3.35 million barrels per day. The UAE reached 3.74 million barrels daily, and Kuwait expanded shipments by one third to 1.44 million barrels per day. For a second consecutive month, no seaborne crude or condensate left Iran due to ongoing US maritime sanctions.
| Country | October Exports (mn bpd) | Change (%) |
|---|---|---|
| Saudi Arabia | 7.00 | 13 |
| Iraq | 3.35 | 9.5 |
| UAE | 3.74 | N/A |
| Kuwait | 1.44 | 33 |
| Iran | 0.00 | N/A |
November futures for Dubai crude fell below December contracts for the first time since July, with an intermonth spread of about $2 per barrel signaling a supply relief in the near term. Increased supply and the possibility of renewed talks between the US and Iran sent Brent and WTI oil prices down nearly 7% on Monday. Analysts pointed out that export recovery is progressing gradually, while OPEC and its allies plan to convene on November 29 to discuss 2027 production targets.
Expectations for a possible restart of discussions between Washington and Tehran lifted gold by 1.9% in the prior session, though the metal lost 6.8% in October as investors facing tech sector losses sold gold holdings to raise cash. During the reporting period, spot gold stood at $3,928 an ounce, Brent crude at $105.83 per barrel, and Bitcoin traded at $76,619.
Markets focus on outcome of US midterms
The chip sector decline in the US cascaded into South Korea and Taiwan, while China’s cheaper share buyback funding failed to arrest Shanghai’s slide. In the Gulf, rising exports and optimism over US-Iran dialogue brought down oil prices. Cheaper oil eased some inflation fears, providing a mild boost for gold. However, last week’s technology stock slump forced some investors to liquidate gold positions, illustrating how equity market pressures can spill into the precious metals market. With these factors at play, global markets turned their attention toward the US midterm elections.
Analysts expect Democrats to secure a House majority, while Senate control remains uncertain. If Democrats win both chambers, oversight of AI firms and data center operators could increase. A divided Congress may complicate budget and debt ceiling negotiations, raising the risk of a government shutdown. Republican victories in both chambers could pave the way for tax cuts and deregulation, supporting AI and infrastructure investment, but potentially expanding deficits and borrowing needs. Following the results, regulatory changes for tech companies and fiscal policy for bonds and the dollar are likely to come into focus.
