Asian stocks rallied on Friday as investors returned to technology and semiconductor shares following a sharp selloff fueled by concerns over artificial intelligence financing and growing competition from China. However, Indonesian equities suffered their worst decline in nearly three decades amid fears of an MSCI market downgrade.
South Korea’s KOSPI surged 3.3%, while Japan’s Nikkei 225 gained 1.7%. The MSCI Asia Pacific index advanced 1.1%, recovering from Thursday’s widespread losses that sent the KOSPI down nearly 8% and triggered a circuit breaker.
Semiconductor stocks led the recovery, with Samsung Electronics rising 2.9% and SK Hynix climbing 2.22%. Japan’s Kioxia gained 3.3%, while Sony advanced 2.9%.
The rebound followed heavy selling in AI-related stocks amid concerns about rising debt levels at cloud computing company CoreWeave. Its shares had plunged 15.5% on Wednesday as reports of distressed bond yields heightened fears about the sustainability of AI infrastructure spending.
Competition from China also pressured chipmakers after ChangXin Memory Technologies reported progress in advanced DRAM technology, potentially challenging established manufacturers.
Elsewhere, Hong Kong’s Hang Seng rose 1.2%, China’s CSI 300 gained 0.9%, and the Shanghai Composite climbed 1.1%. Taiwan’s benchmark advanced 0.7%, although TSMC shares slipped 0.4% despite record quarterly earnings.
Indonesia sharply diverged from regional gains, with the Jakarta Composite plunging more than 11%, marking its steepest daily decline since January 1998.
The selloff followed MSCI’s proposal to downgrade Indonesia from emerging-market to standalone-market status over transparency concerns, opaque ownership structures, and suspected coordinated trading. MSCI expects to announce its final decision by June 2027.
Indonesia’s benchmark has already fallen more than 30% this year, while foreign investors have withdrawn approximately $4.7 billion from local equities.
Meanwhile, stronger-than-expected U.S. inflation data and resilient retail sales continued to complicate expectations for Federal Reserve interest rate decisions.
Investors are closely monitoring Fed Chair Kevin Warsh’s remarks in Bangkok for further monetary policy signals.
Geopolitical tensions involving Saudi Arabia and Houthi forces, alongside potential European Union trade measures targeting China, added uncertainty to Asian markets.
Despite Friday’s recovery, persistent inflation, AI financing risks, and geopolitical instability could keep regional stock markets volatile.
