Asia stocks slide on AI selloff, strong Japan inflation

Asian equity markets declined on Friday as a continued sell-off in artificial intelligence and technology valuations weighed on regional indices, with South Korea and Japan recording their sharpest losses. The downturn followed an overnight slide on Wall Street, where the Nasdaq Composite posted its worst single day since June amid mounting concerns over stretched funding for AI projects and a series of underwhelming tech earnings reports.

South Korea emerged as the region's weakest performer, with the KOSPI index losing 2.1% to hit a three-month low. The index was also set to decline by more than 4% for the week, pressured by continued losses in local chipmaking and electronics stocks. SK Hynix Inc (KS:000660) fell as much as 3%, becoming one of the largest drags on the KOSPI after the company announced it had scrapped plans for a potential U.S. IPO of its flash memory unit, Solidigm. The stock has already fallen 34% over the past month. Rival Samsung Electronics Co Ltd (KS:005930) shed 2.6% on Friday and was down 26.5% in the same period.

Japanese markets were also rattled by a strong inflation reading released Friday, which showed core consumer prices rising above the Bank of Japan's 2% annual target for the first time since December 2025. The data intensified expectations that the central bank will need to raise interest rates further to combat increasingly sticky inflation. The Bank of Japan is scheduled to meet next week, where it is expected to at least hike its annual inflation outlook. The Nikkei 225 index fell 1.4% to a near three-month low, while the TOPIX index dropped 1.8% to a similar level. Reuters reported that Tokyo is considering ending major consumer fuel subsidies in December, a move that could further accelerate inflation.

In China, the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.6% and 1.3%, respectively, both hitting 15-month lows. The CSI 300 officially entered a bear market on Thursday, confirming a drop of over 20% from its June peak. The decline was driven primarily by AI and tech sectors, where earlier valuation buildups gave way to deep losses. Chinese exporters faced additional pressure from the yuan hitting a four-year high earlier in October, while middling economic prints raised concerns about rapidly cooling growth in the region.

Oil prices surged to five-month highs on persistent Middle East tensions, further weighing on risk appetite across the region. While most Asian markets retreated, Hong Kong's Hang Seng index was a small outlier, rising 0.3% on Friday, though it remained near a four-month low for the week. Broader Asian markets saw minor declines, with Singapore's Straits Times index down 0.1%, Australia's ASX 200 down 0.2%, and futures for India's Nifty 50 index falling 0.2%.