Asian Markets Wrap | KOSPI slumps 8% | Nikkei & Shanghai Composite drop 2% each

2 Jul 2026 , 07:38 PM

China | Shanghai Composite 4,028.90 | -2.00%

Mainland equities fell 2%, unable to fully escape the global technology sell-off despite limited direct exposure to the specific catalysts driving the Korea and Japan moves. Semiconductor and AI-linked names in China came under pressure, and broader risk sentiment was cautious as investors in mainland markets digested the implications of the Meta cloud announcement and the evolving narrative around whether the AI infrastructure buildout globally has run too fast.

Japan | Nikkei 225 68,732.93 | -2.47%

Tokyo fell sharply on Thursday, with the Nikkei 225 declining 2.47% and snapping a three-session winning streak as a tech-driven selloff that originated on Wall Street overnight spread rapidly through Asian markets. Chip and AI-linked names bore the brunt of the selling, with Kioxia Holdings, Tokyo Electron, Advantest, Taiyo Yuden, and Fujikura all registering heavy losses. Financial and consumer stocks partially offset the damage, with Mitsubishi UFJ, Mizuho Financial, and Toyota Motor all adding modestly. Analysts described the move as the beginning of a new phase of the AI trade — one defined by harder questions about valuations rather than blind confidence in the AI buildout narrative.

South Korea | KOSPI 7,648.09 | -7.89%

Seoul suffered one of its most brutal sessions of the year, with the KOSPI plummeting 7.89% as Samsung Electronics and SK Hynix — which together account for roughly half of the index’s market weight — both collapsed under aggressive foreign selling. The Korea Exchange activated a sidecar circuit breaker in early trade, temporarily halting programme selling after KOSPI futures dropped by more than a set threshold. Samsung closed 9.06% lower while SK Hynix dropped 14.57%, wiping out billions in combined market value. The selloff arrived on the same day SK Hynix’s chief executive announced a 100 trillion won domestic investment plan — a stark illustration of the disconnect between corporate confidence in long-term AI demand and the market’s short-term anxiety about whether current valuations can hold.

Hong Kong | Hang Seng 23,055.04 | +0.76%

Hong Kong bucked the regional trend, with the Hang Seng rising 0.76% as the market reopened after a public holiday and investors rotated into beaten-down Chinese consumer and financial names. Insurers, lenders, and defensive names led the advance, providing a degree of insulation from the tech-driven selling that gripped Tokyo and Seoul. The Hang Seng Tech Index gained more ground than the broader index, as some investors treated the overnight Wall Street selloff in AI names as a buying opportunity in Chinese technology companies that had already been through their own significant corrections earlier in the year.

India | Nifty 24,175.70| +0.71%

The Indian benchmark indices extended their winning run on July 2, 2026, with Nifty climbing to 24,175 and Sensex surging 579 points to close at 77,502, as a powerful rebound in IT stocks after four straight sessions of losses and Brent crude sliding to $70-71 per barrel drove broad-based buying across Dalal Street. A stronger rupee, India VIX hitting a one-month low, and progress in US-Iran talks added further momentum, with every major sectoral index ending in the green. Read more in detail here

Key News and Impact on India

1. Meta Plans to Sell Excess AI Computing Power — Sparks Global Chip Rout

• Bloomberg News reported on Wednesday, July 1, that Meta Platforms is building a cloud business to sell its surplus artificial intelligence computing capacity to outside developers and businesses, following the model pioneered by SpaceX’s AI division.
• The planned service would allow developers to access AI models hosted on Meta’s infrastructure, including its Muse Spark model, and pay for the computing power needed to run them — a direct challenge to established cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud.
• The announcement triggered immediate alarm across global chip and AI infrastructure stocks, as investors interpreted the move as a signal that one of the world’s largest AI spenders may have overbuilt its capacity — raising the question of whether AI demand is beginning to run ahead of actual economic need.
• On Wall Street overnight, Sandisk, Micron Technology, and Arm plunged more than 10%, while Nvidia fell over 4%, Marvell dropped around 9%, and neocloud providers CoreWeave and Nebius fell over 10% each on fears that Meta could displace their services.
• The Nasdaq Composite fell 0.66% on July 1 on the Meta cloud news, and Asian markets carried those losses significantly further into Thursday’s session.
• Meta shares themselves rose more than 9% on the announcement, as investors viewed the cloud pivot as a path to monetising the company’s enormous but previously unmonetised AI infrastructure investment of up to $145 billion this year.

Impact on India: Meta’s cloud pivot has layered, meaningful consequences for India’s technology sector. On one hand, the entry of yet another hyperscaler into the AI cloud market — alongside Amazon, Microsoft, Google, and now SpaceX — intensifies competition in the very segment where Indian IT firms are building their next wave of revenues. Companies like Infosys, Wipro, TCS, and HCL Technologies are positioning themselves as integrators and managed service providers across these cloud platforms. More hyperscalers in the market typically means more enterprise cloud adoption, which supports Indian IT’s near-term order books. On the other hand, the chip selloff triggered by the Meta announcement is a warning signal that the market is becoming more selective about AI infrastructure investments — and any sustained pullback in global tech sentiment tends to dampen the outlook for Indian IT valuations and client spending expectations. For Indian startups and enterprises that purchase compute from these platforms, more competition in AI cloud supply is directionally positive for pricing and access.

2. KOSPI Crashes Nearly 8% — SK Hynix Announces 100 Trillion Won Investment Plan on the Same Day

• South Korea’s KOSPI fell 7.89% on Thursday, with Samsung Electronics closing 9.06% lower and SK Hynix dropping 14.57% — the two chipmakers together accounting for roughly 50% of the index’s total market value and amplifying every move in either direction.
• The Korea Exchange activated a sidecar circuit breaker in early trade, temporarily pausing programme selling after KOSPI futures fell past the trigger threshold — the third such activation for the index in 2026.
• The trigger for the selloff was the Meta cloud announcement overnight, which raised investor concerns that AI infrastructure spending globally may have peaked or is approaching a level of excess capacity that could reduce the urgency of further chip purchases.
• Foreign institutional investors sold aggressively through the session, repeating the pattern seen on June 8 and June 23, when similar chip-sector concerns triggered brutal sell-offs of 8% and 10% respectively.
• In a remarkable juxtaposition, SK Hynix CEO Kwak Noh-jung held a public briefing on July 2 attended by South Korean President Lee Jae Myung, announcing that the company plans to invest 100 trillion won (approximately $64.4 billion) to build new chip manufacturing plants in Cheongju — 80 trillion won for a new NAND flash fabrication plant known as M17, with construction starting next year and operations targeted for the first half of 2029, and 20 trillion won for advanced chip packaging capacity at the P&T7 facility by late 2027.
• The announcement was part of a broader government-backed investment drive for the Chungcheong region worth 392 trillion won in total, including 140 trillion won from Samsung Group for HBM packaging and display production, and contributions from biotech company Celltrion and several other Korean conglomerates.
• South Korea hopes the combined Samsung and SK Hynix investments will double the country’s memory chip production capacity within five years, positioning it as the dominant force in both HBM and NAND memory for the AI era.
• Investor Michael Burry, known for his prescient short of the US housing market in 2008, reportedly published a note in his subscriber newsletter warning that the scale of South Korean chip investment raises questions about whether AI spending can ever generate appropriate returns.

Impact on India: The KOSPI’s repeat crash pattern — this is now its third severe selloff triggered by AI chip sentiment in 2026 — reinforces a structural concern that is relevant far beyond South Korea. The concentration of South Korea’s benchmark in two companies that are essentially a pure play on the AI memory trade means that every shift in global AI sentiment hits the index with maximum force. For India, the relevance is twofold. First, Indian IT firms that are building AI integration and deployment services depend heavily on a stable and growing global AI spending environment — repeated bouts of AI panic selling introduce uncertainty about whether enterprise clients will maintain planned spending levels on AI projects. Second, the SK Hynix and Samsung investment announcements, while disrupted by the market selloff, confirm that the long-term direction of global semiconductor supply chain investment continues to be driven by South Korea and Taiwan — and that India needs to accelerate its own semiconductor ambitions through the India Semiconductor Mission if it wants to participate meaningfully in the hardware layer of the AI economy.

3. Nikkei Falls 2.5% as AI-Linked Names Lead Decline — Financial Stocks Offer Partial Cushion

• Japan’s Nikkei 225 fell 2.47% on Thursday, snapping a three-session winning streak that had brought the index back above the 70,000 level earlier in the week.
• Chip and AI-related stocks led the losses across the board: Kioxia Holdings fell 11.4%, Taiyo Yuden dropped 4.3%, Tokyo Electron declined 6.2%, Advantest lost 6.7%, and Fujikura shed 6.6%.
• Analysts at Resona Asset Management described the session as a portfolio rebalancing at the start of a new quarter, with investors rotating out of technology stocks to lock in profits and buying cheaper cyclical stocks.
• The Nikkei had surged 37% last quarter alone — its sharpest quarterly advance since records began in 1965 — making profit-taking at this level a logical and expected development.
• Financial stocks provided a partial offset, with Mitsubishi UFJ rising 1.9%, Mizuho Financial gaining 2.4%, and Toyota Motor adding 3.6% — a rotation pattern suggesting domestic demand and interest rate-sensitive names are absorbing some of the capital exiting tech.
• Federal Reserve Chair Kevin Warsh, speaking during the session, said that US inflation expectations had eased somewhat over the past month and that there was no urgency to raise interest rates immediately — a comment that briefly steadied some markets before the chip selloff reasserted itself.

Impact on India: The Nikkei’s AI-driven correction is worth monitoring in the context of SoftBank Group, one of Japan’s most influential technology investors, which has extensive exposure to Indian startups and technology infrastructure through its Vision Fund. When Japanese equity markets face significant technology-led selloffs, there is often a second-order effect on the risk appetite and deployment pace of Japanese institutional capital. SoftBank in particular has been a major backer of Indian companies across fintech, logistics, e-commerce, and AI, and sustained weakness in the Nikkei’s technology sector could over time influence the fund’s capital recycling strategy. More broadly, the Bank of Japan’s ongoing rate normalisation — with the policy rate now at 1%, the highest since 1995 — continues to reshape the yen carry trade dynamics that have historically supported capital flows into emerging markets including India.

4. Hang Seng Rises as Hong Kong Reopens — Apple Reportedly in Talks to Source Chips from Blacklisted Chinese Firms

• Hong Kong’s Hang Seng Index rose 0.76% as the market reopened after a public holiday, with insurance companies, lenders, and defensive names providing the bulk of the advance.
• The Hang Seng Tech Index gained more than the broader index as some investors treated the global AI chip selloff as an opportunity to pick up Chinese technology stocks that had already been significantly de-rated.
• A noteworthy piece of corporate intelligence emerged during Thursday’s session: financial newswire reports citing Nikkei indicated that Apple is in active discussions to source memory chips from ChangXin Memory Technologies and Yangtze Memory Technologies, both of which are currently on the Pentagon’s Section 1260H blacklist of Chinese military-linked companies.
• The discussions are reportedly focused on memory chips earmarked specifically for Apple devices sold in the Chinese domestic market, and no agreement has yet been finalised.
• Apple is also reportedly planning a five-model iPhone lineup split across the second half of 2026 and the first half of 2027, including a larger volume of folding handsets than previously anticipated by analysts.
• The Hang Seng’s outperformance relative to the Nikkei and KOSPI on Thursday highlighted the structural rotation that has been building through 2026, as investors reassess the relative attractiveness of Chinese equities against the more AI-concentrated Korean and Japanese benchmarks.

Impact on India: Apple’s reported discussions with Chinese memory chip companies carry significant geopolitical and trade implications for India. Apple has been one of the most prominent companies accelerating its manufacturing presence in India over the past three years, with Foxconn, Pegatron, and Tata Electronics all assembling iPhones in Tamil Nadu and other Indian states as part of the company’s China-plus-one supply chain diversification. The possibility that Apple is now exploring sourcing memory chips from blacklisted Chinese suppliers — even if only for China-specific device inventory — runs counter to the broader narrative of decoupling from Chinese supply chains. For India, the concern is that Apple’s strategic supply chain decisions are more complex and more China-connected than the headline numbers suggest, and that the pace of genuine India integration may be slower than commonly assumed. The planned five-model iPhone lineup, including new folding handsets, is however positive for India’s assembly capacity expansion story, as higher volume product ranges typically require expanded manufacturing throughput.

5. South Korea’s Government Launches $252 Billion Chungcheong Investment Drive — President Lee Leads Ceremony

• South Korea’s Ministry of Trade, Industry and Energy unveiled a 392 trillion won investment plan for the Chungcheong region on July 2, marking the latest phase of President Lee Jae Myung’s tripolar mega-project strategy for spreading AI-era industrial growth across the country.
• The plan brings together Samsung Group, SK Hynix, and biopharmaceutical company Celltrion as the anchor investors, alongside dozens of smaller companies committing to AI data centres, component manufacturing, and advanced materials production.
• Samsung Group pledged 140 trillion won in total for Chungcheong, covering HBM fabrication and packaging by Samsung Electronics, next-generation OLED display lines by Samsung Display, AI server substrates by Samsung Electro-Mechanics, and battery manufacturing by Samsung SDI.
• Samsung Electronics Executive Chairman Lee Jae-yong attended the signing ceremony, where President Lee drew a comparison between the late Samsung founder Lee Byung-chull’s semiconductor vision in the 1980s and the investments being made today.
• The government committed to establishing a dedicated task force for Chungcheong’s advanced industries immediately, with a comprehensive support plan to be finalised within 100 days, covering industrial sites, electricity and water supply, permits, workforce development, and financing.
• SK Hynix will also begin trading American depositary receipts on the Nasdaq on July 10, a move designed to expand access for US-based investors to the company’s equity.

Impact on India: South Korea’s government-led industrial policy of anchoring national semiconductor champions to specific regions with full state support — land, permits, electricity, water, and financing — is a model that India is actively trying to replicate through the India Semiconductor Mission and the development of chip clusters in Gujarat, Assam, and other states. The scale and speed of South Korea’s Chungcheong commitment underlines how much further advanced the Korean model is in terms of government-industry coordination. For India, the lesson is structural: world-class semiconductor manufacturing clusters require not just financial incentives but a complete ecosystem buildout that takes years to deliver. The good news is that South Korea’s expanded HBM and NAND capacity, if it comes online as planned by 2027 to 2029, could eventually ease the global memory chip shortage that has been keeping server costs elevated — a development that would benefit Indian cloud infrastructure and AI adoption economics over the medium term.