Kospi tumbles 6% as Asian markets brace for TSMC’s earnings test

Asian stocks fell on Thursday as a renewed sell-off in chipmakers exposed the risk of sky-high expectations before TSMC’s quarterly results.

South Korea bore the brunt, with the Kospi down about 6.4% as SK Hynix lost 11% and Samsung Electronics fell more than 8%.

Japan’s Nikkei dropped almost 3%, while Hong Kong bucked the regional weakness.

Bonds found support after US producer prices declined in June, but Brent crude remained above $85 a barrel as the conflict with Iran intensified.

TSMC faces an unforgiving earnings hurdle

TSMC is expected to report net profit of about NT$632.6 billion for the second quarter, a 59% increase that would mark a fifth consecutive record.

The earnings call is scheduled for 2 AM in New York, with investors focused less on the headline figure than on guidance for advanced chips, packaging capacity and capital expenditure.

ASML has already shown how demanding the market has become.

The Dutch equipment maker lifted its 2026 sales forecast to between €43 billion and €45 billion after reporting €9.3 billion of quarterly revenue and €2.9 billion of net income.

Yet Asian chip shares continued to slide. The contrast suggests investors now require more than earnings beats.

They want evidence that AI infrastructure spending can keep accelerating into 2027 without creating excess capacity or weaker returns.

Korea’s chip exposure magnifies the rout

The sell-off hit South Korea particularly hard because semiconductors carry an unusually large weight in the domestic market.

Losses in Samsung and SK Hynix pushed the Kospi towards bear-market territory and triggered temporary trading halts in several major shares.

The Bank of Korea added another layer of pressure by raising its policy rate to 2.75%, its first increase since January 2023.

The move was aimed at containing inflation, household debt and pressure on the won after consumer-price growth exceeded 3% in May and June.

The decision was widely expected, making the chip rout the clearer driver of Thursday’s losses.

Even so, tighter domestic financial conditions provide an uncomfortable backdrop for technology stocks whose valuations depend heavily on profits expected several years ahead.

Cooler US prices help bonds, not risk appetite

US producer prices fell 0.3% in June, their largest decline in 14 months, as energy costs dropped 6.4%.

The report followed softer consumer inflation and reduced the market-implied probability of a July Fed increase to roughly 10%.

That relief supported short-dated Treasuries, but it failed to revive demand for Asian chip shares.

Oil has gained about 12% this week as US-Iran hostilities threaten energy flows, making June’s inflation data appear increasingly backward-looking.

TSMC’s outlook now carries unusual weight. A confident forecast could stabilise the region’s technology trade.

Any caution on customer spending or capacity, however, could deepen a sell-off already driven by an exceptionally high earnings bar.