KOSPI vs Nikkei: Asia’s AI trade fractures ahead of Fed and BOJ decisions

Asian stocks diverged on Tuesday as South Korea’s KOSPI struggled to shake off pressure on semiconductor shares while Japan’s Nikkei 225 recovered, leaving the region’s two most AI-sensitive markets moving in opposite directions ahead of key US and Japanese rate decisions.

The KOSPI fell as much as 0.76% in early Seoul trading before paring most of the decline, extending a difficult stretch after Monday’s sharp technology sell-off.

The Nikkei 225, by contrast, rose about 0.8% in later trade as SoftBank Group rebounded strongly and helped offset weakness elsewhere in the Japanese market.

The split came as investors assessed another rise in crude oil, elevated global bond yields and calls from technology executives for a slower pace of frontier AI development.

MSCI’s broad Asia-Pacific gauge outside Japan was little changed, while Australia’s S&P/ASX 200 fell and Hong Kong’s Hang Seng also traded lower.

KOSPI remains exposed to the AI trade

South Korea remains particularly sensitive to any reassessment of AI spending because Samsung Electronics and SK Hynix carry heavy weight in the KOSPI and sit at the centre of the global memory-chip supply chain.

Samsung slipped in early trade while SK Hynix moved around the flat line, following Monday’s steep semiconductor losses.

Foreign investors were net sellers for a fifth straight session early Tuesday, adding another layer of pressure to the index.

Kiwoom Securities analyst Han Ji-young told Yonhap that part of the overnight weakness in US chip shares had already been reflected in Monday’s Korean sell-off, leaving room for some recovery as investors reassessed valuations.

Nikkei 225 gets a lift from SoftBank

Japan’s Nikkei 225 reversed early losses as SoftBank Group rallied more than 8%, giving the price-weighted benchmark an outsized boost.

Kioxia also advanced, helping Japanese technology shares recover some ground after the previous session’s rout.

The rebound does not remove the macro pressure on Japanese equities.

The yen traded around 154.6 per dollar, while Japan’s 10-year government bond yield hovered near 3% as investors prepared for the Bank of Japan’s decision on Friday.

The BOJ is widely expected to raise its policy rate by 25 basis points to 1.25%, the highest level in 31 years.

Markets will focus less on the widely anticipated move than on Governor Kazuo Ueda’s guidance on how quickly further tightening could follow.

Oil and rates keep both markets on edge

Crude remained another source of risk. Brent traded near $107 a barrel and US crude above $102 after renewed attacks on Saudi infrastructure revived concern about supply disruptions.

Higher energy costs are particularly uncomfortable for import-dependent Japan and South Korea because they can lift inflation while squeezing corporate margins.

US Treasury yields have added to that pressure, with the 10-year yield briefly touching 5%.

Markets are assigning roughly a 90% chance to a quarter-point Federal Reserve increase on Wednesday, which would be the first rate rise in roughly three years.

JPMorgan strategist Mislav Matejka argued that a measured Fed hike need not derail equities if earnings remain strong, but the combination of expensive oil, elevated yields and uncertainty around AI spending leaves the KOSPI and Nikkei 225 vulnerable to sharp swings through the rest of the week.