South Korea's market falls 7.6 percent and trading halts, as the chip selloff rolls across Asia

The selloff that began in American chip stocks did not stop at the Pacific. It landed in Asia on Thursday morning and hit hardest in the market most completely built on two memory chip giants.

South Korea's Kospi finished 7.6 percent lower, at a six month low, erasing all of its gains since April. Selling was heavy enough to trigger a circuit breaker, a temporary halt to trading that the exchange has had to use repeatedly this year. SK Hynix fell 11 percent and Samsung Electronics fell 9.5 percent. The two companies dominate the index so completely that when memory chips fall, the country falls with them. Foreign investors were net sellers of about 3.6 trillion won of Korean shares in the session, as of October 15.

Japan's Nikkei finished 4.9 percent lower, with memory maker Kioxia down more than 12 percent and SoftBank Group down about 9 percent. Taiwan's Taiex fell more than 3 percent. TSMC, the world's largest maker of advanced chips, reported another quarter of record profit and still finished 2 percent lower, after its chief executive, C. C. Wei, told analysts that rising component prices and macroeconomic uncertainty were challenging demand in some parts of the market. A closely watched index of semiconductor stocks is now down roughly 20 percent from its peak in June.

Two forces are doing the work. The first is price: hotter than expected American inflation, reported on Wednesday and again on Thursday, raises the cost of the enormous debt that the artificial intelligence buildout now runs on, and chip and data centre stocks are the most exposed to that cost. The second is competition. Chinese maker CXMT has announced progress on advanced memory chips, the same announcement that knocked Korean shares earlier this week, and it raises a plain question about how much profit the established makers can keep.

The Kospi was up as much as 116 percent on the year in June. It has since given back more than a third of its value and now stands 32 percent up on the year, as of October 15. Nothing about the demand for memory chips collapsed on Thursday. What changed, for the second time in a week, was what investors are willing to pay for it. This report describes market moves only. It is not financial advice.