Asian markets fall on tech stock rout as high US inflation weighs on Wall Street

Asian markets experienced a significant decline on Thursday, driven by substantial losses in AI-related stocks following a sharp drop on Wall Street. The concerns surrounding increased competition and profit growth within the chip sector exacerbated the situation. South Korea's Kospi index dropped over 7%, while Japan's Nikkei 225 index fell by 5.12% by midday local time. Hong Kong's Hang Seng index experienced a 1% decrease, and China's Shanghai Composite Index declined by 1.75%.

The International Monetary Fund highlighted the heavy reliance of the Asia region on the AI boom, noting that strong global demand for semiconductors, AI infrastructure, and related technology products has bolstered exports and investments, especially in economies integrated into technology supply chains. However, the IMF cautioned that a correction in AI-related investments or asset valuations could disproportionately impact Asia due to its central role in global technology supply chains.

The recent decline in US stocks was largely attributed to the higher-than-expected consumer price inflation in September, which rose to 3.7% on an annual basis. This was well above the 3.6% forecast for September and August's 3.4%. Core inflation also surpassed expectations, standing at 2.6% year-on-year. The risk of a potential rate hike by the US Federal Reserve, driven by the US inflation data, contributed to heightened market volatility.