EMERGING MARKETS-Asia stocks hit 2-month low as South Korean chipmakers plummet

By Nikita Maria Jino

Oct 13 (Reuters) - Stocks in emerging Asia dropped to their lowest in two months on Tuesday, dragged down by a more than 7% fall in South Korean chipmakers on concerns over competition from Chinese rivals, durability of the AI rally and high borrowing costs.

An MSCI index tracking emerging Asian equities .MIMS00000PUS tumbled more than 3% to an over two-month low. A broader gauge of Asia-Pacific equities outside of Japan .MISX00000PUS fell nearly 3% to the lowest since late July.

South Korea's benchmark KOSPI .KS11 shed more than 7% to its weakest since late July, extending losses to nearly 16% over five consecutive sessions - the longest losing streak since September 2024.

The losses triggered a "sidecar" trading curb, temporarily halting programme trading. The junior KOSDAQ index .KQ11 dropped 5.5% in its fourth straight day of losses.

Memory chip bellwethers Samsung Electronics 005930.KS and SK Hynix 000660.KS each shed around 9% to hit mid-August lows. The two stocks account for over half of the KOSPI and around 16% of the MSCI EM Asia equities index.

Overnight, the tech-heavy Nasdaq Composite .IXIC lost 0.4%, with US memory chipmaker Micron Technology MU.O dropping nearly 4%. .N

Investor sentiment was hit by rising concerns that Chinese semiconductor makers are narrowing the technology gap with global rivals, after reports suggested CXMT 688825.SS had made progress on a new server memory chip.

"This is a collision of two concerns: growing Chinese competition threatening memory pricing power, and investors unwinding crowded AI trades," said Song Zhe, senior investment specialist, Asia ex-Japan and EM equities & Greater China equities, BNP Paribas Asset Management.

"The selloff reflects a sharp reset in expectations rather than a sudden deterioration in underlying AI demand."

Tech-dominated Taiwan stocks .TWII also slipped around 2.5% in their worst trading day since late July. Semiconductor major TSMC 2330.TW declined nearly 2%, ahead of its quarterly earnings later this week.

In Southeast Asia, stocks in Indonesia .JKSE and the Philippines .PSI fell 0.7% and 0.8%, respectively.

Singapore shares .STI were an outlier, ticking up 0.4%. Investors await the central bank's review on Wednesday, where it is widely expected to tighten monetary policy as robust growth and inflation risks bolster the case for another move.

Among regional currencies, the South Korean won depreciated as much as 0.8%, a day after scoring a two-year peak. The Taiwan dollar weakened 0.6% to 32.090 per dollar, the weakest since mid-August.

The Indian rupee built on its recovery after Monday's 1% rally, boosted by central bank measures to temper dollar demand alongside likely intervention through dollar sales. The currency ticked up 0.6% on the day.

China's yuan held near its strongest in nearly four years, shrugging off a strong dollar as central bank guidance kept the currency steady.

Markets in Thailand .SETI were closed for a public holiday.

HIGHLIGHTS:

** AI market correction would hit real economy, IMF official says

** Indonesia central bank has full autonomy over interest rates, new chief says

** Japan's wholesale inflation remains elevated, keeps alive BOJ rate-hike view