Markets Rattled by Tech Sell-Off and Middle East Tensions

**Leanna Byrne** (0:01)
Asian markets took a turn for the worst today, and tech stocks are to blame. It's World Business Express from the BBC World Service. I'm Leanna Byrne. China and North Korea look to strengthen economic ties, and Prada takes a giant leap into the world of spaceware.
Fluggable stock markets have tumbled after a sharp sell-off in technology shares and renewed tensions in the Middle East. South Korea's KOSPI index was forced to suspend trading for 20 minutes after plunging nearly 9% of the open, closing the day down more than 8%. Japan's Nikkei also fell sharply, while European markets saw milder declines. Analysts say markets are being hit by a messy mix of geopolitical risk and tech sector uncertainty, leaving investors cautious about the outlook for the week ahead. Here's Min Suk Ki, Managing Director of the London Office at Korea Investment and Securities Europe.

**Min Suk-hee** (1:01)
It's not just one factor that caused a sharp decline in the market today.
It's not just today that we saw a sharp correction in the Korean market, so it can be attributed to a combination of factors, and that includes short-term overheating in the semiconductor and AI-related stocks, excessive concentration in the large cap names, foreign investors have been selling Korea for many weeks now, and lastly, there were some concerns about US interest rates. If you look at the news flows last week, the US private payrolls grew by 122,000, which was stronger than expected. In addition, the war in Iran seems to be dragging on, so all these are causing worries about inflation in the US, and that caused the 10-year treasury yield to spike. So the market seems to be quite concerned about the inflation pressure in the US there.
In terms of AI and semiconductor market, I think what triggered the sell-off in the semi-name is the Broadcom's guidance for the third quarter, which came below the market expectation. And also, there is growing concerns that some aggressive AI investment by big tech companies in the US could weaken profitability. So companies like Alphabet, Meta, they are looking to raise significant sums of money and thus worrying the investors. So yeah, it's not just one factor that caused the Korean market to crash today. It's just a combination of various factors.

**Leanna Byrne** (2:37)
So you've got that combination, but it's so important for listeners, isn't it? To realize how important AI and chip makers are for the Cosby. So essentially, it's all wrapped up in Samsung, isn't it?

**Min Suk-hee** (2:50)
Semi-sector is very important for Cosby right now. If you look at the earnings contribution to Cosby by these semi-names, then it's 70%.
And the Korean government has been trying to reduce what we call Korea discount, but it's actually the semiconductor names earnings that have actually boosted the Cosby since last year. And as you correctly mentioned, it is amazing how concentrated the earnings and the share price rally has been centered on Samsung Electronics and SK Hynix.

**Leanna Byrne** (3:23)
Min Suk-hee from Korea Investment and Securities Europe there. Meanwhile, in North Korea, Chinese leader Xi Jinping is visiting Pyongyang. It's his first time back since 2019, and there's a lot to discuss between Xi and the country's leader, Kim Jong Un, including trade ties. Here's the BBC's China correspondent, Laura Bicker.

**Laura Bicker** (3:47)
This is a bit about Xi Jinping showing North Korea once again, who's boss. China has been worried about Pyongyang's closer relationship with Moscow, and that's happened since the Ukraine war. Kim Jong Un had something Vladimir Putin needed, munitions and manpower to center the front line in Ukraine. In return, Russia has been propping up Kim Jong Un's economy. Now, that's usually China's job. For decades, China has provided around 90% of North Korea's food and fuel. President Xi will want to reassert his influence over Kim Jong Un. This is all about stability for China. They do not want a volatile and unpredictable North Korea on their doorstep.

**Leanna Byrne** (4:32)
Laura Bicker there. Now, one economic incentive Xi could offer Kim is resuming Chinese group tourism to North Korea and joint economic projects. Leo Guangjong is a tourist in Dandong, visiting the China-North Korea border to take a look at the neighboring country. He says he wants a stable China-North Korea relationship.

**Leo Guangjong** (4:55)
I came from Yangcheng, Jiangsu province.
I happened to be in Shenyang working on a project. It's a good opportunity to visit the border region and take a look at the China-North Korea border, especially the North Korean side. We used to think North Korea was quite less developed, but it actually looks pretty good now. It's not bad at all. It's developed quite well.

**Leanna Byrne** (5:17)