Kopsi, Taiwan, other Asian stocks tumble after US midterm elections signal Democratic victory. What’s the connection?

South Korean and Taiwanese equities tumbled on Wednesday as early results from the US midterm elections pointed to significant Democratic gains, raising concerns that tighter scrutiny of data centre projects could slow investment in artificial intelligence.

Technology-heavy markets bore the brunt of the sell-off, with South Korea's KOSPI dropping 4% and Taiwan's benchmark index falling more than 3% to its lowest level since late July. The weakness also pulled MSCI's emerging markets index down 1.8%, taking it close to a seven-month low.

The US midterm election results could influence several major market themes, including the expansion of AI data centres, the country's fiscal outlook, defence expenditure and regulatory policies covering sectors such as healthcare, banking and cryptocurrencies.

South Korean chipmakers came under heavy selling pressure, with SK Hynix declining 6.1% and Samsung Electronics falling 4.1%. Taiwan's TSMC lost 2.2%.

Emerging Asian currencies, meanwhile, strengthened broadly as the US dollar weakened sharply. The South Korean won led the gains, rising 0.5%, while the Malaysian ringgit and Philippine peso each edged up around 0.1%.

US stock futures, bonds down

US bond yields fell on Tuesday as investors sought the safety of government debt amid a sharp decline in equity futures, following projections of substantial Democratic wins in the 2026 US midterm elections. The dollar weakened against major currencies following the developments. The euro gained 0.5% to $1.1249, while the pound rose 0.37% to $1.3464. The dollar index fell 0.37% to 101.34.

The benchmark 10-year Treasury yield dropped nearly 5 basis points to 4.902%, while the 2-year yield declined 6 basis points to 4.55%. The 30-year bond yield also fell 5.29 basis points. Bond prices and yields move in opposite directions, with one basis point equivalent to 0.01%.

The political developments also triggered a sell-off in US equity futures. Contracts linked to the S&P 500 fell as much as 1.1%, while Nasdaq-100 futures lost more than 2%. Dow Jones Industrial Average futures dropped 341 points, or almost a per cent. In a separate reading, S&P 500 futures were down 1%, and Nasdaq-100 futures had shed nearly 2%.

Investors remain on edge that a substantial Democratic majority in the Senate, in a scenario being described as a potential 'blue wave', could weigh on AI-related stocks. The sector has already retreated in recent weeks amid questions about the pace of data centre spending. However, with votes still being counted in several states, investors cautioned that the market reaction could be temporary, given the sharp swings often seen during election nights.

Election projections pointed to Democrats securing control of both chambers of Congress. Poll estimates indicated a Democratic victory in the House, while the Senate contest was initially still uncertain.

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