Asian markets opened the week with strong gains led by semiconductor shares, but the two headline rallies rest on very different footing. South Korea's advance comes with a coherent, chip-led story: exporter dollar selling supporting the won, foreign inflows into equities, and a genuine global AI demand tailwind visible in the gains of Samsung Electronics and SK Hynix — the world's two largest producers of memory chips, whose high-bandwidth memory (HBM) supplies the AI accelerator market. Japan's rally is a harder case. The stated rationale — that calmer bond markets and a steadier yen, attributed to actions by US Treasury Secretary Scott Bessent, eased volatility and encouraged risk-taking — sits uneasily beside the reported facts: Wall Street actually fell on Friday as a strong US jobs report raised the odds of a Federal Reserve rate hike, with only the semiconductor sub-index bucking the decline.

South Korea: Kospi and Won Rally on AI Chip Optimism

The Kospi rose around 2.9% to about 6,880, having climbed as much as roughly 3.5% intraday to its highest level since 27 August. Samsung Electronics gained around 3.7% and SK Hynix rose about 6%, leading the benchmark higher on optimism around AI chip demand.

The Korean won hit its strongest level since October 2024 amid expectations of continued dollar selling by major exporters, while foreign investors were net buyers of roughly 790 billion won, about $590 million, worth of shares. South Korea's exports so far this year have already surpassed last year's full-year record, underscoring how much the economy is currently riding on global AI chip demand — semiconductors have long been the country's single largest export category, so benchmark moves in the Kospi and the won are tightly coupled to the global chip cycle.

Korean Bonds Diverge From Global Pressure

The more interesting detail sits in South Korean bonds. Both the three-year and ten-year government bond yields edged slightly lower on the day — a notable contrast with the broader global bond picture described by economist Mohamed El-Erian in recent comments to CNBC, where he warned of continued upward pressure on yields driven by a shrinking pool of reliable buyers for government debt worldwide. El-Erian did not comment on Korea specifically.

If that divergence holds, it points to idiosyncratic domestic demand for Korean debt holding up even as reliable buyers of US and European government bonds reportedly thin out — suggesting Korean bonds are, for now, driven more by domestic demand dynamics than the buyer-base concerns El-Erian flagged for markets such as the UK, Japan and France.

Japan: Nikkei Gains, but the Rationale Draws Questions

Japan's Nikkei rose around 2.3% to about 66,500, with the Topix up around 0.8% to roughly 4,136, as chip-related shares tracked gains in their US counterparts. Japan's own semiconductor-equipment makers and chip-adjacent names have made the Nikkei increasingly sensitive to global AI capex cycles, which helps explain why the index followed the Philadelphia Semiconductor Index higher even when broader US equities did not.

A circulating narrative credits Bessent's actions with curbing bond yields and stemming yen weakness, reducing volatility and encouraging a shift to risk-on positioning. That account deserves caution. The same reporting notes that Wall Street actually fell on Friday, as a robust US jobs report raised the probability of a Federal Reserve rate hike this month, with only the Philadelphia Semiconductor Index, up around 3.4%, bucking that decline.

A narrow, chip-specific rally against a backdrop of broader US equity weakness and rising rate expectations is a different story than the calmer, market-wide risk-on narrative offered for Japan's gains. That discrepancy is worth keeping in mind before taking the stated rationale at face value — and whether subsequent sessions confirm a broad-based risk-on shift or reveal the gains as chip-specific will be the test of both narratives.

Source: Investinglive