Asia Markets Drop in Tech-Led Selloff

By Tracy Qu

Asia stocks slumped Wednesday morning, dragged down by tech stocks after worries about sky-high valuations and an artificial-intelligence bubble sparked a selloff in the U.S. overnight.

South Korea markets were among the hardest-hit, with a rapid, sharp drop in futures triggering a brief trading halt. The benchmark Kospi index was last down 6.1%, on track for its sharpest daily drop since August 2024.

Chip and other electronics stocks pulled down Japan's Nikkei index too, dragging it over 4% lower. SoftBank Group and Kioxia took notable losses, down 13% and 10% respectively.

Caution is emerging in many markets after a recent run of record highs, fueled by worries about over-stretched valuations. Uncertainty about the timing of the Federal Reserve's next rate cut is also weighing on sentiment.

"As stock indices rise, warnings about frothy equity markets have also become louder," said Eugene Leow, senior rates strategist at DBS. "Given that there has been no major correction in stocks for some time, we are somewhat wary of a spillover unto the rest of the asset classes if sentiment does take a sustained dip."

Morgan Stanley Chief Executive Ted Pick and other finance bosses this week warned that winning streak has made stocks vulnerable to a pullback.

Analysts say the AI trade is starting to make some investors nervous, with big tech players like Meta, Alphabet, Microsoft and Amazon.com all laying out plans for massive spending and capacity buildouts.

The tech-heavy Nasdaq index led declines in the U.S. overnight, while the VIX index of stock volatility--Wall Street's so-called fear gauge--jumped.

U.S. stock futures were pointing lower in Asia on Wednesday, with futures tied to the Dow, S&P 500, and Nasdaq down 0.6%, 0.95% and 0.2%, respectively.

In Hong Kong, the Hang Seng Tech Index fell 2.3%, with tech giants Alibaba Group and Tencent Holdings dropping 2.6% and 2.2%, respectively.

Chinese stocks were in the red as well, with Foxconn Industrial Internet losing 4.7% and iFlytek off by 2.4%. The Shanghai Composite Index was 0.9% lower.

Safe-haven assets like gold and government bonds benefited from the risk-off tone.

Spot gold edged 0.2% higher to $3,938.67 per troy ounce, while yields on 10-year U.S. Treasurys fell 3 basis points to 4.0561% and those on 10-year Japanese government bonds declined 1.5 basis points to 1.655%. Bond yields move inversely to prices.

The yen too strengthened against other G-10 and Asian currencies.

Risk-off sentiment is driving haven flows into Japanese yen, said Fawad Razaqzada, market analyst at forex.com.

"Given how heavily shorted the yen has been, it doesn't take much to spark a rapid drop in [cross-JPY] pairs, and that's exactly what we're seeing today," the analyst said.

The dollar index was flat at 100.13.

Still, some bet the global rally will continue on the back of insatiable AI appetite, robust earnings and easing trade tensions, said Ipek Ozkardeskaya at Swissquote Bank. November and December tend to be good months for stock investors too, she added.

"If all goes well, the year could end without another April-like sharp selloff across global financial markets," the senior analyst said in a note.

But buzzy AI headlines don't necessarily reflect reality.

"If you take tech out, the rest is not necessarily sweet. Even within tech, valuations are extremely high, and the urge to see ROI [return on investment] is growing," she said. "And if tech sneezes, global financial markets--starting with the U.S.--will catch a cold.

Write to Tracy Qu at tracy.qu@wsj.com

(END) Dow Jones Newswires

November 04, 2025 22:00 ET (03:00 GMT)