BENGALURU (June 11): Emerging Asian equities were under pressure on Thursday, with stocks in Jakarta snapping a two-session rally fuelled by major Indonesian banks, after renewed US strikes on Iran lifted oil prices and triggered a sell-off in artificial intelligence stocks.
The US launched new strikes against multiple targets overnight in Iran, in response to which Iran announced a closure of the Strait of Hormuz. Crude prices rose more than US$1 a barrel on the escalation.
The MSCI’s gauge of emerging market equities fell 0.8%. Stocks in Taiwan slid 2.3%, while those in South Korea’s index opened down 4.4% but later traded about 0.3% lower as of 0344 GMT.
Samsung Electronics and SK Hynix fell more than 2%, while the world’s top contract chipmaker, TSMC, shed 1.1%.
Modest declines indicate investor fatigue amid ongoing geopolitical shifts, said Lloyd Chan, a senior currency analyst at MUFG Global Markets Research Asia, adding that markets are less reactive after sharper moves earlier in the week.
South Korea’s benchmark Kospi index has lost roughly 9% over the past two weeks, while Taiwan’s main equities gauge is down nearly 6% this week.
Chipmakers in the two countries have been the biggest beneficiaries of global AI euphoria and a persisting memory chip shortage, surging when hopes of a durable peace in the Middle East were on the rise, only to be whipsawed along every new escalation.
Uncertainty over a Middle East peace deal and a decline in AI stocks led to US$27.08 billion in foreign outflows from regional stocks this month, surpassing May’s US$24.08 billion net outflow, according to LSEG-compiled data.
In Southeast Asia, the Jakarta Composite Index fell 1.5%, snapping a two-session relief rally in which it added 10%, fuelled by major lenders in the country that surged following an off-cycle rate hike by the central bank.
The Indonesian rupiah weakened to 17,970 per dollar, holding under the 18,000 mark. The currency, down more than 7% this year, had strengthened to as much as 17,875 a dollar after the surprise rate hike on Tuesday.
Indonesia’s 10-year bond yield edged up to 7.518%, not far from its highest point since November 2022, while the five-year yield eased to 7.551% after hitting a six-year high of 7.588% a day earlier.
The next major test for Indonesian assets will be the central bank’s monetary policy meeting and an MSCI global market accessibility review next week.
Most currencies remained under pressure on the day: the South Korean won weakened to 1,526 per dollar but remains in the green for the week, helped by an official crackdown on speculative trading.
The Taiwan dollar weakened to 31.702 and the Indian rupee to 95.63 against the US dollar.
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