EMERGING MARKETS-South Korea leads Asia selloff as tech rout deepens, AI frenzy cools

By Roshan Thomas and Sameer Manekar

Nov 5 (Reuters) - Stocks in emerging Asia recorded their biggest slump in seven months on Wednesday, with South Korea's benchmark index diving in its worst session in more than a year, as investors dumped tech shares on concerns over stretched valuations.

The MSCI index of emerging Asia equities .MIMS00000PUS and a broader index tracking Asia equities excluding Japan .MIAPJ0000PUS shed more than 2% to mark their worst intraday decline since the early April "Liberation Day" tariff turmoil.

Stock markets across Asia retreated after the CEOs of Morgan Stanley MS.N and Goldman Sachs GS.N voiced doubts about the sustainability of high valuations after a rush into AI-related stocks in recent months sent most benchmark gauges to records.

In Asia, that frenzy was led by chipmakers and AI-adjacent stocks in South Korea and Taiwan.

South Korea's KOSPI index .KS11 has surged a staggering 80% since April, with more than a third of the gains coming last month. Chipmaker Samsung Electronics 005930.KS has risen 90% this year, while peer SK Hynix 000660.KS has more than tripled.

Those gains have firmly positioned the KOSPI index among the top-performing equity markets globally this year.

Taiwan's benchmark index .TWII has advanced 22% this year, driven mostly by a 40% rally in TSMC 2330.TW shares.

But it all came to a head on Wednesday as caution over an overheated rally, stretched valuations, a reassessment of Fed cuts and caution from Wall Street bigwigs triggered the steepest sell-off in months.

"Retail investors and hedge funds have been extremely exposed on the long side to technology stocks in particular globally," said Jon Withaar, a senior portfolio manager at Pictet Asset Management in Singapore.

Thilan Wickramasinghe, head of equity research at Maybank said, "We think weaker-than-expected guidance from AMD and Super Micro Computer in the U.S. , plus a potential stay in further Fed cuts in December, have dented investor enthusiasm, precipitating a pullback in regional markets."

On Wednesday, South Korea's KOSPI .KS11 fell 6.2% to drop below the psychologically key 4,000 level, marking its worst intraday decline since August last year. The index was trading 2.9% down in afternoon trading in Seoul. Samsung Electronics fell 8% and SK Hynix dived 9.2%.

The South Korean won KRW=KFTC extended losses, weakening 0.6% to its lowest point since mid-April.

Taiwan's stocks .TWII shed 2.6% to fall by the most in three weeks. Its dollar TWD=TP weakened for the sixth consecutive session to hit its lowest point since early May.

In Southeast Asia, Singapore's FTSE Straits Times index .STI slipped more than 1%, while Malaysia's KLCI .KLSE lost 0.4%. Stocks in the Philippines .PSI shed more than 1.6%.

Also Wednesday, China said it would suspend its 24% additional tariff on U.S. goods for a year but retain a 10% levy. The SSE Composite Index .SSEC edged 0.1% higher.

Currency markets in the region were largely on the back foot against a steady U.S. dollar =USD.

The Philippine peso PHP= lost 0.4% and the Indonesian rupiah IDR= inched 0.2% lower, continuing to hover around a six-week low.

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