Japan’s Nikkei 225 struggled for direction on Tuesday while South Korea’s KOSPI pushed higher, highlighting a widening split between two of Asia’s biggest technology-heavy markets.
The Nikkei swung around the flat line as a rapidly strengthening yen weighed on exporters and revived expectations for a Bank of Japan rate increase.
In Seoul, the KOSPI extended Monday’s sharp rally, climbing 1.82% to 7,122.93 by late morning as Samsung Electronics and SK Hynix advanced.
MSCI’s Asia-Pacific index outside Japan rose 0.2%, while Australian shares fell 0.6%. S&P 500 futures slipped 0.1% after Monday’s US holiday.
KOSPI extends its rally as chip demand optimism returns
South Korean stocks continued to outperform after the KOSPI jumped more than 4% in the previous session.
Samsung Electronics rose 2.59% and SK Hynix gained 3.98%, while foreign and institutional investors were both net buyers.
Together, they purchased more than 610 billion won of shares by late morning, offsetting heavy selling from retail investors.
The rally reflects renewed confidence in the memory-chip cycle.
The Korea Times reported that KB Securities expects exceptionally tight memory supply next year and estimates inventories at Samsung and SK Hynix have fallen below 10 days.
Nomura Securities also sees the two stocks as deeply undervalued relative to the expected expansion in global semiconductor capacity.
That backdrop has helped the KOSPI push through 7,100 even as rising oil prices threaten to complicate the inflation outlook.
Stronger yen keeps the Nikkei 225 under pressure
Tokyo is facing a different problem.
The yen strengthened into the 153-per-dollar region, its strongest level since February, creating pressure on exporters whose overseas earnings become less valuable when translated back into yen. Toyota, machinery companies and electronics stocks were among the early laggards.
The currency move followed stronger Japanese economic data.
Second-quarter GDP growth was revised to an annualised 1.4% from 1.1%, while real wages increased 2.4% in July. Nominal wages jumped 4.7%, their fastest increase since 1997.
Capital Economics analysts said in research published Tuesday that strengthening wage growth makes a quicker pace of BOJ tightening increasingly compelling.
Markets are already leaning heavily towards another rate increase at the September 17-18 meeting.
Oil and bond yields complicate the Asian rally
The wider macro backdrop also remains difficult for both markets.
Brent crude hovered above $97 a barrel as renewed US-Iran tensions raised fears of prolonged disruption around the Strait of Hormuz. WTI traded above $92.
The US 10-year Treasury yield was around 4.79%, while markets continued to price roughly a 60% chance of another Fed increase this month.
Friday’s US inflation report is now the next major test for global equities.
Elsewhere, the dollar index traded near 98.82. Gold gained about 0.5% to $4,428 an ounce, bitcoin edged 0.1% higher to around $79,333 and ether added 0.2% to roughly $2,499.
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