(July 13): Asian currencies weakened against the US dollar on Monday as renewed tension in the Middle East sent oil prices surging and revived fears of inflation, while South Korean shares fell over 9% to trigger a circuit breaker, led lower by SK Hynix.
The US dollar index crept higher against a basket of major currencies on the day as renewed conflict in the Middle East sent oil prices 4% higher, fanning inflation fears as well as the prospect of rate hikes by central banks globally.
Currencies in emerging Asia were on the back foot: the Indonesian rupiah slipped to as much as 18,140 per US dollar, its weakest point in more than a month, while the South Korean won fell as much as to 1,508.9 a dollar.
South Korea’s benchmark equity gauge Kospi closed nearly 9% lower, dragged lower by a sharp 15.4% plunge in SK Hynix, the world’s leading AI memory chipmaker, as investors booked profits after a bumper US debut on Friday. Samsung Electronics, SK Hynix’s rival chipmaker, ended 10.7% lower.
“When you have two companies, Samsung and SK Hynix, making up more than half an index of approximately 900 constituents, this kind of reaction isn’t unexpected,” said said Zavier Wong, a market analyst at eToro.
“Add in elevated margin debt and single stock leveraged ETFs rebalancing on down days, and it’s normal to see moves like this overshoot the underlying news.”
The Kospi is now down slightly over 25% since its record close on June 22, although it remains one of the top performing equity markets in the world with a 65% gain so far this year.
Wong doesn’t expect the volatility in Kospi to settle until the end of the second quarter earnings season and get a better sense of whether actual results can hold up against how much good news has already been priced in.
“I would expect swings to stay sharp rather than taper off in the near-term.”
In Malaysia, the ringgit weakened to 4.0770 a dollar, while stocks jumped to a three-week high.
A crushing defeat of Prime Minister Datuk Seri Anwar Ibrahim’s coalition by a key partner in a Johor state poll on Saturday has raised questions over the strength of the blocs’ alliance at the federal level amid talk of an early general election.
Elsewhere in emerging Asia, stocks in the Philippines fell 0.3%, while those in Indonesia gained 0.4%.
Singapore’s benchmark index declined as much as 0.7%, snapping seven consecutive sessions of record highs.
For the week, investors are on the watch for Singapore’s advance second-quarter economic growth data, US inflation print, Bank of Korea’s interest rate decision, and Malaysia’s inflation print and advance economic output data.
Uploaded by Magessan Varatharaja
