Asian equities moved cautiously on Wednesday after South Korea’s KOSPI staged an unconvincing recovery following what was reported as the fifth-biggest one-day selloff in its history the day before. The index initially climbed in morning trade but had flattened by midday in Seoul, where city streets have for months been marked by workers trading on mobile phones.
Market-watchers cautioned that momentum may be ebbing. According to BNY, there are early indications that the retail-investor buying that helped drive repeated record highs on the index is beginning to flag. The pullback in enthusiasm followed a sudden cooling by the regulator toward popular leveraged exchange-traded funds, a development that appeared to temper appetite among smaller traders.
Across the Taiwan Strait, chipmaker TSMC was trading lower. The broader semiconductor complex will look to Micron’s earnings, due after the U.S. market close, for fresh direction. Investors are particularly focused on whether Micron will disclose long-term supply agreements and upfront payments from major customers - items that could influence sentiment in a market where positioning is already described as stretched.
Risk appetite in the chip sector is underlined by a recent Bank of America June survey of fund managers, which found that 80% of respondents consider being long semiconductors the most crowded trade, a record reading. The same survey also reported that more than half of managers view the current moment as the "boom" phase of the investment cycle in artificial intelligence - not yet the phase of euphoria, profit-taking, displacement or panic associated with an asset-price bust.
Index provider MSCI kept Indonesia within its ongoing market classification review, leaving investors awaiting clarity on whether proposed reforms to free float and ownership disclosure will yield a more liquid and transparent market. The review outcome left stocks in Jakarta unsettled.
European data and currency moves are also on traders’ radar. Germany’s Ifo survey of business conditions is scheduled later in the day and is forecast to show a slight improvement. The euro, however, remains under pressure amid a stronger U.S. dollar, which markets are pricing in based on expectations for several central bank interest rate hikes this year.
In currency markets, the yen was steady at 160.56 in Asia. This week’s online discussion between Japan’s Minister of Finance Satsuki Katayama and her U.S. counterpart Scott Bessent left investors cautious about the prospect of coordinated intervention to support the yen. Separately, a draft report reviewed by Reuters indicated Japan plans to study ways to improve management of its $1.3 trillion foreign exchange reserves - a stockpile that is currently thought to be largely held in U.S. Treasuries.
Key developments that could influence markets on Wednesday:
- Economics: German Ifo survey
- Earnings: Micron