Asia-Pacific stock markets continued to face selling pressure after opening on Thursday (the 30th), with the Federal Reserve's latest interest rate decision and Middle East geopolitical risks serving as the twin drivers of market sentiment. Japan's Nikkei 225 opened lower and trended downward, while South Korea's KOSPI index opened higher before quickly turning negative, extending the sharp correction that has defined trading this week.
The Fed announced early Thursday Taiwan time that it would hold its benchmark interest rate steady, but the decision was accompanied by dissenting voices, with three voting members advocating for a quarter-point rate hike. Coupled with Chair Kevin Warsh's decision to cease providing explicit forward guidance, uncertainty over the future monetary policy path intensified. Following the announcement, international gold prices rebounded sharply, with spot prices rising 1.2% to $4,076.41 per ounce, temporarily shaking off the heavy selling pressure driven earlier by the Middle East conflict and expectations of elevated interest rates.
Selling Pressure Persists in Japanese and South Korean Markets
When Tokyo markets opened on the 30th, the Nikkei 225 stood at 61,258.34, down 175.85 points from the previous session, marking a third consecutive day of declines. Market reports indicated that on the prior U.S. trading day, both the Dow Jones Industrial Average and the Nasdaq Composite closed in the red, while the Philadelphia Semiconductor Index suffered a heavy loss exceeding 5%, directly weighing on Japan's semiconductor and financial sectors. Selling pressure was particularly pronounced in financial stocks such as banks and securities firms, signaling deepening investor concerns that a high-interest-rate environment could impact the economy and corporate earnings.
Volatility in South Korea's stock market was even more severe. Although the KOSPI index opened with a modest gain of about 0.3% on the 30th, it quickly reversed course in early trading, with losses widening to 1.2% at one point. This followed a 10.84% plunge on Tuesday and a further 5.98% drop on Wednesday, bringing the cumulative decline over just two trading sessions to more than 16%. The market has triggered circuit breakers nine times so far this year.
The Bank of Korea stated early on the morning of the 30th that it would closely monitor domestic and international financial markets and potential risks. The central bank specifically highlighted the increasing uncertainty surrounding the Fed's policy direction and the situation in the Middle East. For South Korea, which is heavily dependent on energy imports, a sharp rise in oil prices could not only push up domestic inflation and corporate production costs but also potentially delay the Bank of Korea's own policy pivot, while amplifying volatility in the won, bond markets, and foreign capital flows.
Chip Giants Lead Decline as SK Hynix Earnings Disappoint
At the heart of this week's South Korean stock market rout is the sharp decline in shares of chip giants Samsung Electronics (005930.KS) and SK Hynix (000660.KS). SK Hynix's recently released second-quarter earnings showed revenue of ₩79.32 trillion (approximately $55.0 billion), up 257% year-over-year, and operating profit of ₩60.5 trillion (approximately $42.0 billion), a more than fivefold surge compared to the same period last year. However, both figures fell short of market estimates of ₩84 trillion and ₩64 trillion, respectively. Against a backdrop of questioned AI demand prospects and elevated market valuations, the earnings miss triggered a violent deleveraging effect. SK Hynix shares briefly plunged nearly 20% during trading on the 29th, marking the largest intraday drop on record.
South Korea's Minister of Economy and Finance, Koo Yun-cheol, acknowledged during a parliamentary hearing that the market is highly concentrated in two heavyweight stocks, Samsung Electronics and SK Hynix, which together account for 50% of the index, exacerbating market polarization and volatility. He revealed that the government is internally studying ways to reduce stock market volatility and may further adjust regulations related to single-stock leveraged ETFs. Potential measures under consideration include limiting individual investment amounts, increasing transaction costs, and introducing simulated trading requirements. These supplementary measures are expected to take effect starting on the 31st.
Middle East Conflict and Fed Decision Rattle Commodities
Geopolitical risks continue to inject uncertainty into commodity markets. U.S. President Donald Trump recently announced retaliatory strikes against Iran for an attack on a U.S. military base in Jordan, a move that drove oil prices sharply higher and reignited concerns about global inflation.
London Metal Exchange (LME) copper futures edged lower ahead of the Fed's decision, falling $104, or 0.76%, on Wednesday to settle at $13,581 per metric ton. Market analysts noted that AI infrastructure has been viewed as a significant growth driver for copper demand, so when AI trading enthusiasm cooled and chip stocks plunged, copper prices were simultaneously pressured by sentiment. Citigroup maintained its forecast for copper to reach $14,500 per metric ton over the next three months, but financial media industry research suggests that with upward momentum waning, copper's fair value sits around $13,500 per metric ton.
Other base metals showed mixed performance on Wednesday: LME aluminum rose 1% to $3,180, nickel gained 1% to $17,137, zinc slipped 0.2% to $3,569.5, tin advanced 0.6% to $53,882, and lead added 0.3% to $1,899.5.
Gold Rebounds Sharply as Market Interprets Fed as Dovish
The precious metals market experienced a dramatic turnaround. Before the Fed's decision, spot gold prices had touched their lowest level since July 21, pressured by a strong U.S. dollar and concerns that the Fed might unexpectedly raise rates. However, once the Fed opted to stand pat, gold prices quickly rebounded.
Nicky Shiels, head of metals strategy at major Swiss refiner MKS Pamp, stated in a report that confidence in returning to the gold market is cautiously strengthening, identifying $4,200 per ounce as the next key level to watch.
Since the outbreak of the U.S.-Iran conflict more than five months ago, gold prices have fallen by nearly a quarter, as surging energy prices intensified inflationary pressures and significantly increased the likelihood of interest rates staying higher for longer. However, since late June, bargain buying has consistently emerged, keeping gold prices anchored near the critical $4,000 per ounce support level. Germany's Commerzbank has lowered its year-end gold price forecast by $300 to $4,500 per ounce, noting that without a reversal in market interest rate expectations, a sustained回流 of funds into gold ETFs will be difficult, and a significant rebound in gold prices will be unlikely.
The heavy sell-off in South Korean stocks briefly dragged down other Asian markets, including those in Japan and Taiwan. On Wednesday, Taiwan's TAIEX closed down 1,564.18 points, or 3.76%, at 40,039.18, while the Nikkei 225's decline narrowed to 1.91%. Despite the recent sharp correction, South Korea's stock market remains up 42.94% year-to-date, Taiwan's market is up 43.64%, and the Nikkei 225 has risen 23.89%, indicating that prior accumulated gains have provided a substantial buffer against this wave of selling.
Looking ahead, market focus will shift to the upcoming release of the U.S. June Personal Consumption Expenditures (PCE) price index, which is expected to offer further clues on the Fed's subsequent policy path. Additionally, developments in the Middle East situation and whether various governments will introduce further stabilization measures in response to stock market volatility will be key variables influencing the short-term direction of Asia-Pacific markets.
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