BENGALURU (Oct 13): Emerging Asian equities hit two-month lows on Tuesday, dragged by a sharp sell-off in South Korean chipmakers amid worries about rising Chinese competition, the durability of the artificial intelligence (AI)-driven semiconductor rally and the impact of high borrowing costs.

An MSCI index tracking emerging Asian equities tumbled nearly 3.5% to its lowest since early August. A broader gauge of Asia-Pacific equities outside Japan fell nearly 3% to the lowest since late July.

The rout in South Korea's heavyweight semiconductor sector reverberated across regional markets, with Samsung Electronics and SK Hynix together accounting for roughly 16% of the MSCI emerging Asia index.

Kospi closed down 5.5%, its weakest finish since July 30, extending losses to nearly 14% over five consecutive sessions in the longest losing streak since September 2024.

The benchmark at one point slid 7.4%, triggering a "sidecar" trading curb that temporarily halted program trading. The junior KOSDAQ index ended 1.4% lower.

Samsung Electronics pared some losses but still fell 7.4%, while SK Hynix slid 10%.

Asian chipmakers tracked overnight weakness on Wall Street, where memory-chip maker Micron Technology fell nearly 4%.

Sentiment was dented by reports that Chinese memory-chip maker CXMT had made progress on a new server-memory chip, fuelling concerns that domestic semiconductor firms are closing the technology gap with global rivals.

"This indicated that the mainland memory industry was catching up to industry peers faster than expected and caused a broad sell-off across memory-related stocks in Japan, Korea, Taiwan and the US," said Kieron Poon, investment director of Asian equities at Aberdeen Investments.

Others argued the market reaction was excessive.

Aadil Ebrahim, group head of equities at Klay Group, said CXMT's advances were not in high-bandwidth memory chips, where South Korean and US firms maintain an edge.

"The real question is whether CXMT can manufacture these chips at scale with yields comparable to established memory makers," he said.

Tech-dominated Taiwan stocks fell 2% to its lowest since late July, with chip giant TSMC shedding nearly 2% ahead of earnings later this week.

Elsewhere, Indonesian stocks slipped 0.4% and Philippine shares fell 0.9%, while Singapore bucked the trend, gaining 0.6% ahead of a monetary policy review on Wednesday, where the central bank is widely expected to tighten policy.

Among currencies, the South Korean won weakened as much as 0.8%, a day after hitting a two-year high. The Taiwan dollar fell nearly 1% to 32.21 per US dollar, its weakest level since mid-August.

The Indian rupee rose to a one-month high of 95.073 per dollar after fresh central bank measures aimed at easing pressure on the currency, alongside likely market intervention.

Thai markets were closed for a public holiday.

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