EMERGING MARKETS-Asian shares fall as AI-linked selloff deepens ahead of US midterm elections

By Roshan Thomas

Nov 3 (Reuters) - Technology-heavy markets in South Korea and Taiwan led declines across Asia on Tuesday as disappointing US corporate earnings rattled investor sentiment globally, while regional currencies moved in different directions ahead of US midterm election results.

Weak sentiment toward AI-linked stocks persisted as a string of earnings reports and corporate developments, including Oracle's ORCL.N fundraising plans and Anthropic's updated IPO filing, heightened investor concerns about valuations and the costs of pursuing growth in the sector.

South Korea's KOSPI .KS11 lost 3.2%, despite data showing October inflation slowed, easing pressure on policymakers, though it remained well above target.

Shares of SK Hynix 000660.KS and Samsung Electronics 005930.KS shed 4.8% and 3.7%, respectively, weighing on the broader market.

Taiwan's benchmark .TWII slipped more than 2%, sending the benchmark to its lowest level since early August and leaving it more than 10% below the record high it touched on October 6.

Losses in Taiwan and South Korea, which together account for more than half of the MSCI Emerging Asia equities index .MIMS00000PUS, dragged the benchmark down 1.5%.

Meanwhile, Singapore's Straits Times Index .STI fell 1.5% for a fourth consecutive session, deepening its retreat from the record high touched in early September.

Losses in banking heavyweights DBS Group DBSM.SI, United Overseas Bank UOBH.SI and Oversea-Chinese Banking Corp OCBC.SI weighed on the benchmark as investors braced for earnings due later in the week.

"Selloff in Singapore bank stocks in October was related to market concerns that higher bond yields could weigh on bond valuations and therefore book value, which would potentially create pressure on the banks' CET1 ratio and, by extension, shareholder returns," said Kathy Chan, equity analyst at Morningstar.

Elsewhere, regional currencies traded mixed as investors awaited the US midterm elections, which supported the dollar's safe-haven appeal, although gains in the greenback were tempered by a sharp decline in oil prices.

Glenn Yin, director of research at ACCM, said the elections could ripple through Asian currency markets via their impact on US Treasury yields, trade policy and broader risk sentiment.

The Korean won strengthened 0.5%, while the Taiwan dollar slipped 0.6% to its weakest level since mid-April 2025.

"The technology upcycle still underpins relative strength for both economies, but flows remain the key constraint on how far that feeds through to the currencies," analysts at MUFG said in a note.

The Indonesian rupiah strengthened to 18,135 per US dollar, while Indonesian stocks .JKSE reversed an early 0.9% gain to fall 1.8%. Data on Monday showed the country's trade surplus narrowed to $3.36 billion in September and inflation eased slightly to 3.23% in October.

Analysts at Bank of America said a sharp rise in rupiah volatility could increase the likelihood of a Bank Indonesia rate hike, as currency weakness risks fuelling imported inflation and worsening balance-of-payments pressures on concerns over the upcoming MSCI index review.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields at 7.707%

** Yuan set for biggest daily drop in 6 months after PBOC raises FX RRR

** Apple forecasts margin drop in holiday quarter as rising memory costs bite