Red wave in Asia: Japan and South Korea stocks slump as Wall Street's AI rally runs into valuation reality

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Asia stocks trade mixed on Wednesday following Wall Street’s overnight sell-off after Morgan Stanley and Goldman Sachs CEOs questioned the sustainability of lofty valuations. Sentiment weakened further after Wall Street bank CEOs warned that markets could face significant drawdowns.

Gold prices rose to around $3,970 per ounce on Wednesday, paring losses from the previous session, supported by a broad risk-off sentiment that boosted the appeal of safe-haven assets.

Bitcoin (BTC-USD [https://seekingalpha.com/symbol/BTC-USD]) fell below $100,000 in early November, nearing six-month lows and extending losses that began during the crypto market’s so-called Black Friday in mid-October.

Retail sales in Singapore rose by 2.8% year-on-year in September 2025, easing from an eighteen-month high of 5.2% advance in the previous month.

Indonesia’s economy grew 1.43% qoq in Q3 2025, matching market consensus of 1.4% but slowing sharply from the 4.04% jump in Q2. Indonesia’s unemployment rate fell to 4.85% in Q3 2025 from 4.91% in the same period a year earlier.

South Korea’s KOSPI tumbled 4.5% after hitting a record high in the previous session. Chipmaking giants Samsung Electronics and SK Hynix slid between 6% and 7%.

Japan (NKY:IND [https://seekingalpha.com/symbol/NKY:IND]) fell 3.18% to toward 49,000 while the broader Topix Index dropped 3% to 3,212 on Wednesday, extending losses from the previous session and mirroring Wall Street’s overnight selloff amid renewed concerns over lofty AI valuations. The Japanese yen [https://seekingalpha.com/symbol/USD:JPY#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews] appreciated toward 153 per dollar on Wednesday, extending gains from the previous session.

Tech and AI-related stocks led the decline, with SoftBank Group, Advantest, Lasertec, Fujikura, and Tokyo Electron plunging between 3.2% and 9.4%.

China (SHCOMP [https://seekingalpha.com/symbol/SHCOMP]) rose 0.31% to around 3,940, while the Shenzhen Component lost 0.9% to 13,060 on Wednesday, extending declines from the previous session, and the offshore yuan [https://seekingalpha.com/symbol/USD:CNY#source=url_first_level%3Amarket-news%7Csection%3Aglobal%7Csection_asset%3Afull_story%7Cbutton%3Abody_link]

The RatingDog China General Services PMI declined to 52.6 in October 2025 from 52.9 in September, remaining above market expectations of 52.5. The RatingDog China General Composite PMI fell to 51.8 in October 2025 from 52.5 in the previous month.

The People’s Bank of China (PBoC) announced on Tuesday it resumed purchasing sovereign bonds on the open market in October, marking its first such move since December 2024.

Chinese Premier Li Qiang said China’s economy is projected to exceed CNY 170 trillion (USD 23.9 trillion) within five years, highlighting the country as a growing market for global companies and signaling efforts to ease concerns over trade imbalances.

U.S. President Donald Trump signed two executive orders Tuesday that reduce tariffs on fentanyl-related imports from China and extend a freeze on certain reciprocal levies, cementing key provisions of his trade agreement with Chinese leader Xi Jinping.

Hong Kong (HSI [https://seekingalpha.com/symbol/HSI]) fell 0.40% to 25,628 in Wednesday morning trade, marking a second straight session of losses amid steep drops across sectors.

The S&P Global Hong Kong SAR PMI rose to 51.2 in October 2025 from 50.4 in the previous month, marking a third consecutive month of expansion in private sector activity and the fastest pace since November 2024.

India (SENSEX [https://seekingalpha.com/symbol/SENSEX]) market closed. India’s Finance Minister, Nirmala Sitharaman, said the government remains confident of meeting the FY 2025/26 fiscal deficit target of 4.4% of GDP for the year ending March 2026, according to The Economic Times.

Australia (AS51 [https://seekingalpha.com/symbol/AS51]) fell 0.13% to around 8,795 in Wednesday morning trade, extending a sharp 0.9% loss in the prior session to hit its lowest level in over a month. The Australian dollar [https://seekingalpha.com/symbol/AUD:USD#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews] weakened around $0.647, extending its recent declines to an eleven-week low.

The S&P Global Australia Services PMI Business Activity Index rose to 52.5 in October from 52.4 in September.

The Ai Group Industry Index for Australia’s manufacturing sector fell 8.8 points to -22 in October, showing further deterioration. The Ai Group Australian Industry Index improved by 4.2 points to -11.2 seasonally adjusted in October.

In the U.S. on Tuesday, all three major indexes ended lower [https://seekingalpha.com/news/4514322-sp500-nasdaq-composite-dow-jones-stock-market] as investors grew increasingly uneasy of overstretched valuations in AI-driven names and cautious outlooks from top Wall Street executives.

U.S. stock futures declined further on Wednesday after the major averages fell sharply in the previous session amid growing concerns over elevated AI valuations: Dow +0.03%; S&P 500 -0.20%; Nasdaq -0.34%.

CURRENCIES: (JPY:USD [https://seekingalpha.com/symbol/JPY:USD]), (CNY:USD [https://seekingalpha.com/symbol/CNY:USD]), (AUD:USD [https://seekingalpha.com/symbol/AUD:USD]), (INR:USD [https://seekingalpha.com/symbol/INR:USD]), (HKD:USD [https://seekingalpha.com/symbol/HKD:USD]), (NZD:USD [https://seekingalpha.com/symbol/NZD:USD]).

MORE ON ASIA:

China’s factory growth cools to 50.6 in October, export uncertainty rises [https://seekingalpha.com/news/4512722-chinas-factory-growth-cools-to-506-in-october-export-uncertainty-rises#source=url_first_level%3Amarket-news%7Csection%3Amarket-pulse%7Csection_asset%3Anews_title]

Australia's factory activity contracts for first time in 2025 to 49.7 in October [https://seekingalpha.com/news/4512723-australias-factory-activity-contracts-for-first-time-in-2025-to-497-in-october#source=url_first_level%3Amarket-news%7Csection%3Amarket-pulse%7Csection_asset%3Anews_title]

Australian monthly inflation eases slightly, annual figures show persistent pressure [https://seekingalpha.com/news/4512726-australian-monthly-inflation-eases-slightly-annual-figures-show-persistent-pressure#source=url_first_level%3Amarket-news%7Csection%3Amarket-pulse%7Csection_asset%3Anews_title]

China's economic slowdown deepens as factory activity hits six-month low to 49.0 in October [https://seekingalpha.com/news/4512084-chinas-economic-slowdown-deepens-as-factory-activity-hits-six-month-low-to-490-in-october#source=url_first_level%3Amarket-news%7Csection%3Amarket-pulse%7Csection_asset%3Anews_title]

Australia Q3 producer inflation hits one-year high, rises by 1.0% Q/Q [https://seekingalpha.com/news/4512085-australia-q3-producer-inflation-hits-one-year-high-rises-by-10-qq#source=url_first_level%3Amarket-news%7Csection%3Amarket-pulse%7Csection_asset%3Anews_title]