EM stocks sink as Korea chip rout tests Fed-day calm again

EM stocks fell for a second day as South Korea’s chip selloff dragged the benchmark index to its lowest level in about 3.5 months.

The MSCI Emerging Markets Index was down 1.4% by 9:43 a.m. in London, extending its two-day loss to 5%. The move marked a sharp break between equities and currencies, with the emerging-market currency returns gauge up 0.3% as the dollar edged lower before the Federal Reserve’s policy decision.

Kospi rout drives losses

South Korea sat at the center of the equity pressure. Its main share benchmark dropped 16% over two sessions, turning a local technology selloff into the dominant force behind the broader emerging-market decline.

SK Hynix Inc. fell 10% on Wednesday after a rise in profit failed to meet elevated investor expectations. The reaction showed how little room chipmakers have for merely good results after a rally built around artificial intelligence demand and memory-chip recovery hopes.

Samsung Electronics Co. also traded sharply lower before its earnings report due Thursday. That added weight to the regional selloff because the company is one of Asia’s most closely watched technology bellwethers and a major component of South Korea’s market.

Currencies resist the equity shock

The currency picture was less uniform than the equity move. A softer dollar gave some emerging-market exchange rates breathing space, even as equity investors cut exposure to Asian technology names.

Eastern European currencies weakened against the euro, with the Hungarian forint down 0.4%. The split matters because emerging-market assets often trade as one risk bucket during stress, but local rates, external balances and regional exposures can still pull currencies in different directions.

In Indonesia, the rupiah was stabilizing after trading close to a record low. Bank Indonesia was intensifying efforts to support the currency after the abrupt resignation of the central bank chief, according to the source material.

Oil added another cross-current for investors. Prices rebounded after a pause in fighting between the US and Iran ended, removing one of the factors that had helped risk sentiment earlier in the week.

Fed decision sets scenarios

The Federal Reserve decision is the next test for whether the selloff stays concentrated in equities or spreads more forcefully into currencies. “Investors are clearly waiting for today’s Fed decision, which could have a meaningful impact on EM currencies,” Frantisek Taborsky, a strategist at ING Bank, said in a note.

Taborsky said the balance of risks was uneven. “The risks look asymmetric if the Fed hikes, versus our baseline, as that would likely hit CEE currencies harder. By contrast, an on-hold decision should provide only a modest boost.”

If the Fed holds policy steady, the mechanism for relief would likely run through the dollar: less upward pressure on the US currency can reduce stress on emerging-market exchange rates. For SK Hynix, however, a hold would not erase the earnings-expectation problem, and the wider chip sector would still need Samsung’s results to steady sentiment.

If the Fed raises rates instead, the pressure could shift from a Korea-led equity story into a broader macro trade. A firmer dollar would tighten financial conditions for emerging markets, weigh on central European currencies and make it harder for technology shares to recover quickly because global investors would have a higher hurdle for risk assets.

The open questions are concrete: whether the Kospi can stop its two-day slide, whether Samsung’s earnings calm or worsen the chip trade, how far Bank Indonesia goes to defend the rupiah, and whether oil keeps rising. Those four channels will decide whether the latest fall in EM stocks remains a sector-led correction or becomes a wider emerging-market stress episode.