South Korean stocks volatile as rate-hike fears spur position review

BENGALURU: South Korean equities seesawed on Wednesday as expectations of US interest rate hikes and concerns over lofty valuations prompted investors to reassess their leveraged positions following an AI-fuelled rally earlier this year.

Indonesia’s main equities gauge erased early gains, trading almost 2 percent in red, and the rupiah inched closer to the key 18,000 mark, after index provider MSCI deferred its review of the country’s emerging-market status to November.

Stocks in Taiwan slipped more than 2 percent, while markets in Singapore touched a record high. The Thai baht languished near 13-month lows against the dollar, while the Philippine peso weakened for a seventh consecutive day.

South Korea’s benchmark KOSPI index rebounded as much as 4 percent within 30 minutes of trading on the day, rebounding from a double-digit drop in the previous day. However, the recovery lost momentum by noon in Seoul.

After falling as much as 1.5 percent, the benchmark gauge was last trading 0.4 percent lower, as of 0438 GMT.

The KOSPI volatility index climbed to a record 97.72 on Wednesday, a sharp rise from the mid-70s level seen just two weeks ago.

“Elevated KOSPI volatility reflects uncertainty around the AI-driven rally, while expectations of higher-for-longer US rates continue to weigh on sentiment,” said Lukman Leong, an analyst at finance brokerage, Doo Financial Futures.

MSCI retained South Korea in its “emerging markets” category, citing long-standing accessibility issues in the onshore foreign exchange market in its annual market classification review.

A wobbly KOSPI and an over 2 percent decline in Taiwan’s main gauge pushed the MSCI Emerging Markets Asia gauge to a near two-week low.

Indonesia, Southeast Asia’s largest economy, clung to its emerging market status after MSCI’s decision to defer review, giving regulators more time to deliver market reforms and avert a downgrade that could trigger billions of dollars in outflows.

Foreign investors have withdrawn 67.34 trillion rupiah (USD3.75 billion) from Indonesia’s equity market so far this year, per exchange data, with roughly a quarter of the outflows occurring this month alone.

The rupiah weakened to 17,955 per US dollar, within striking distance of the key 18,000 mark and its lifetime low of 18,190 per piece.