Key facts
- U.S. stock indexes are expected to open higher on Monday.
- Chipmakers like Nvidia, Broadcom, and Micron Technology rose in premarket trading.
- A sharp sell-off on Friday had wiped out $1 trillion in market value for U.S.-listed chipmakers.
- Asian markets fell sharply, mirroring a U.S. tech sell-off, with South Korea's KOSPI down over 6.8%.
- Strong U.S. jobs data and Broadcom's outlook fueled fears of a Federal Reserve rate hike.
- Leveraged investment into equities by South Korean retail investors topped a record 60 trillion won ($39.06 billion) by the end of May.
- South Korea's first single-stock leveraged ETFs linked to chipmakers Samsung Electronics and SK Hynix were introduced on May 27.
- Global stocks fell Monday due to Middle East tensions and a tech sell-off, with oil prices rising.
U.S. stock futures indicated a higher opening on Monday, buoyed by a rebound in chipmakers and easing Middle East tensions. This follows a significant tech sell-off that impacted global markets, particularly in Asia, where the KOSPI index plunged due to concerns over AI-linked shares, Broadcom's outlook, and renewed fears of Federal Reserve interest rate hikes.
Asian markets experienced sharp declines, mirroring Wall Street's tech rout. South Korea's KOSPI was hit particularly hard, falling by over 8% and triggering circuit breakers, as strong U.S. jobs data and Broadcom's guidance fueled bets on continued high interest rates. The dollar reached a two-month high against the yen, prompting vigilance for potential intervention.
In South Korea, a surge in leveraged investment by retail investors, known as 'ants', has become a growing concern. These investors, chasing stock rallies fueled by AI chipmakers like Samsung Electronics and SK Hynix, have pushed leveraged equity investments to a record 60 trillion won ($39.06 billion) by the end of May. The introduction of single-stock leveraged ETFs linked to these chip giants on May 27 saw overwhelming demand, with over 350,000 people completing mandatory training.
Regulators and policymakers are expressing caution about the amplified market volatility associated with this leverage. The Bank of Korea warned of sharper corrections if latecomers increasingly rely on borrowed funds due to FOMO (Fear Of Missing Out), noting that margin loans are concentrated on chip shares. The Finance Minister also flagged concerns about "excessive herd-like behaviour."
Despite the broader market downturn, U.S. chipmakers like Nvidia, Broadcom, and Micron Technology showed gains in premarket trading, suggesting a potential stabilization. However, persistent concerns over Middle East conflict and the possibility of further Fed rate hikes continue to cast a shadow over market sentiment.