(Bloomberg) — Asia’s two tech-heavy economies South Korea and Taiwan are facing an uphill battle in trying to stem losses in what are already among the world’s worst-performing assets this year. They are hit particularly hard by a global growth slowdown and US chip restrictions.
Most Read from Bloomberg
Sandy Hook Families Ask Judge to Max Out Alex Jones Penalty
Trump Firm’s Tax Fraud Trial Promises Ex-CFO as Star Witness
Apple’s Industrial Design Chief Hankey to Leave Three Years After Ive
Authorities are stepping up actions, including introducing curbs on short selling, readying market stabilization funds to buy assets and intervening in currency markets in moves reminiscent of the early days of the pandemic. Korea is resuming corporate-bond purchases as yields surge and default risk spreads.
While markets everywhere have seen gut-wrenching moves in reaction to accelerating inflation, aggressive central bank rate hikes and a soaring dollar, South Korea and Taiwan look especially vulnerable among major economies. Both are highly dependent on exports for growth, and are swayed by global demand for chip. Adding to their woes is the impact of new US curbs on supply chains linked to China’s semiconductor industry.
The interventions haven’t stopped the declines. Taiwan’s equity benchmark has dropped about 8% since a support fund was activated in mid-July and Korean shares were down 11% in the past two months, leaving stock gauges in both markets more than 25% lower this year. The Korean won and Taiwanese dollar are also among the top losers in the world against the greenback year to date.
“These stabilization measures are intended to buy enough time until the tech cycle bottoms out and foreign investors return,” said Wai Ho Leong, strategist at Modular Asset Management. “Turning markets around is a different matter.”
Chip Woes
Amid these headwinds, analysts have cut their earnings estimates for Korea’s SK Hynix Inc. and Samsung Electronics Co. to the lowest in more than two years.
While the chipmakers have won approval from the US to keep ordering American equipment for their China plants for one year, concerns swirl around their business models as the US seeks to curb China’s self sufficiency and advancement in military capabilities.
A recessionary environment in the West and China’s Covid Zero policy are also having knock-on effects. The Taiwanese central bank warned of “severe economic challenges” in 2023, while South Korea recorded its longest string of trade deficits since the Asian financial crisis.
“In the near term we remain cautious on Asian stocks -– in particular on stocks or equity markets that are exposed to external growth — such as Korea” and tech hardware firms, Nomura Holdings Inc. strategists including Chetan Seth wrote in a recent note. Samsung and Taiwan Semiconductor Manufacturing Company account for the biggest weights on the Kospi and Taiex indexes, respectively.
Bond Gloom
Korea’s resumption of a $1.1 billion bond stabilization fund, which was announced just a few weeks after a rare default on commercial paper by the developer of Legoland Korea theme park in Gangwon province, may have limited impact because the overall market is so much bigger, and yields continue to rise. Still, the fund may prompt others to follow suit if credit markets remain weak.
“Korea may only be the first of a string of credit interventions in Asia amid higher risks of financial accidents,” DBS Group Holdings Ltd. strategists including Chang Wei Liang and Philip Wee wrote in a note.
Korea and Taiwan aren’t alone in supporting markets. Japan has intervened in the currency market to stem the yen’s decline, but it failed to prevent the currency’s plunge to a 32-year low. China is easing restrictions on mutual funds’ purchases to back its plunging stock market.
‘Long Winter’
To be sure, slumping valuations in Korea and Taiwan are proving attractive for some, and could spark short-term relief rallies. Foreign investors snapped up Korean shares for 13 straight days this month, and Morgan Stanley is among the outliers calling an end to the underperformance of Asian technology stocks as it sees most risks as priced in.
Others remain skeptical that the export-reliant economies will pick up anytime soon, and some favor Asian markets that are backed by strong domestic demand and a revival in tourism such as India and Indonesia.
“It’s going to be a long winter — these support measures will probably not be enough,” said Ken Peng, head of Asia investment strategy at Citigroup Inc.’s private-banking arm, referring to actions from Korean and Taiwan authorities. “A recovery will likely have to wait until the USD peaks and rolls over, likely when non-US growth is expected to recover.”
–With assistance from Youkyung Lee, Hooyeon Kim, Betty Hou, Catherine Bosley and Abhishek Vishnoi.
Most Read from Bloomberg Businessweek
The Private Jet That Took 100 Russians Away From Putin’s War
Female Bosses Face a New Bias: Employees Refusing to Work Overtime
Europe’s Most Valuable Tech Company Tries to Avoid the Chip War
Ukrainians Return Home by the Millions Even as War Rages On
The Rich Are Spending on Luxury Goods Like It’s 1999
©2022 Bloomberg L.P.
Yahoo Finance Editor-in-Chief Andy Serwer explains the supply and demand shocks that are hurting the U.S. economy.
Australia's telco, financial and government sectors have been on high alert since Singtel-owned Optus, the country's second-largest telco, disclosed on Sept. 22 a hack that saw the theft of personal data from up to 10 million accounts. That attack was followed this month by a data breach at health insurer Medibank Private, which covers one-sixth of Australians, resulting in personal information of 100 customers being stolen, including medical diagnoses and procedures, as part of a theft of 200 gigabytes of data.
(Bloomberg) — Gold surged as Japanese authorities intervened to prop up the yen, further driving down the greenback and increasing the appeal of the precious metal.Most Read from BloombergSandy Hook Families Ask Judge to Max Out Alex Jones PenaltyTrump Firm’s Tax Fraud Trial Promises Ex-CFO as Star WitnessApple’s Industrial Design Chief Hankey to Leave Three Years After IveBullion surged as much as 1.8% on Friday, the most in more than two weeks, and was on pace for a weekly gain, while the dol
Inflation is forcing the IRS to change how much people can contribute for retirement. We’ll also look at a battle between Democrats and the Federal Reserve, and how many Americans have applied for student loan forgiveness. But first, see how lawmakers are riding a wave of Swiftie fandom. Welcome to On The Money, your nightly guide to everything…
A frenzied race for Nevada's U.S. Senate seat is shaping up to be one of the closest in the country and both candidates hope their messages on abortion, immigration, inflation or public safety will tip the balance in their favor. The stakes for Democratic U.S. Sen. Catherine Cortez Masto and Republican challenger Adam Laxalt are especially high. The winner could determine which party controls the Senate and the GOP considers Nevada one of its best opportunities to turn a blue seat into red.
The legal wrangling between the PGA Tour and LIV Golf escalated Friday in a U.S. District Court.
Don Bolduc, the GOP Senate nominee in New Hampshire, is narrowing the gap between him and Sen. Maggie Hassan (D) with less than three weeks until Election Day, a new survey indicated on Friday. According to a poll by Fabrezio, Lee and Associates, a GOP pollster, that was commissioned by Bolduc’s campaign, Hassan’s lead is down…
The Nasdaq Stock Market has quietly halted listings of small-cap Chinese companies, holding up approval letters and demanding more information about related parties in deals, after a series of meteoric run-ups—and dramatic collapses—in IPOs this year. Shares of more than 20 recently listed companies have risen over 100% on their first day of trading. The exchange has privately informed lawyers over the past few weeks that new listings of small-cap companies were being subjected to additional reviews, and approvals were suspended until further notice.
Traveling ghouls and candy-seekers this Halloween may find their bags slightly light compared to previous years. The price of bulk Halloween candy has increased over 13% among Hershey products, and the average household expects to spend $30 to $35 on candy, with a total of $10.6 billion spent on the spooky holiday in 2022, according to a National Retail Federation survey. Of course, to the Web3 aficionado, fat sacks of candy are not the only bags they are watching closely, and not all of the Hal
The outlook for CSCO stock depends on trends for cloud computing, plus corporate and telecom networks amid the shift to remote work.
Software growth stocks are still looking for a catalyst as the sector lags the S&P 500. Guidance for 2023 will be key for software stocks.
October is set to be the worst month so far in the ugliest year ever for hacks that have stolen digital assets, according to Chainalysis.
Fintech stocks have under-performed vs. the S&P 500 amid fears of a recession and competition from startups and tech giants Apple and Amazon.
S&P 500 giant Vertex and Cheniere Energy, the largest U.S. liquefied natural gas producer, are setting up bullishly in the bear market.
Coins remain flat, crypto-friendly Berlin bank Nuri will shutter, and Ripple broke new ground in its lawsuit with the SEC.
The Northern Irishman can return to the top of the rankings for the first time since July 2020.
Tesla stock hit fresh bear market lows after Q3 sales missed amid demand concerns. BYD sees blowout Q3 profit growth.
Former Chinese President Hu Jintao was unexpectedly led off the stage during the closing session of a week-long party congress in Beijing on Saturday.Hu was seen speaking briefly to his successor, President Xi Jinping, whom he had been sitting next to in the front row.There was no official comment about the reason for Hu being helped off the stage.AP
Nasdaq Inc has put the brakes on initial public offering (IPO) preparations of at least four small Chinese companies while it investigates short-lived stock rallies of such firms following their debuts, according to lawyers and bankers who work on such stock launches. The stock exchange operator's actions come amid a surge in the shares of Chinese companies that raise small amounts, typically $50 million or less, in their IPO. Douglas Ellenoff, a corporate and securities attorney at Ellenoff Grossman & Schole LLP, said he was informed by the Nasdaq that certain IPOs will not be allowed to proceed "until they determined what has been the aberrational trading activity in certain Chinese issuers earlier this year."
China's central bank chief Yi Gang is likely to step down after he was dropped from an elite body of the ruling Communist Party, with a former central banker a leading contender to succeed him, sources close to the central bank said. The potential retirement in early 2023 of Yi, 64, has been the subject of intense speculation as he nears the official retirement age of 65 for minister-level officials. Yi is among pro-reform policymakers not named on Saturday as full or alternate members of the party's new Central Committee.


Shop Sephari