The worst performance since November! Foreign capital dumped $3.4 billion, with South Korea and Indonesia leading the decline in emerging markets

Emerging market assets are experiencing the most severe sell-off in over two months, with a sharp decline in technology stocks and falling commodity prices dragging down overall performance, led by the South Korean and Indonesian markets. The MSCI Emerging Markets Index fell by as much as 1.5% on Friday before narrowing its losses, while a similar index tracking emerging market currencies remained basically flat. Both indicators are set to record their largest weekly decline since November. The South Korean Kospi index plummeted by as much as 5.1% on Friday, and the Indonesian stock market benchmark index fell by 3%, making it one of the worst-performing markets this week. International funds are accelerating their exit. On Thursday, overseas investors sold a record $3.4 billion worth of South Korean stocks, highlighting the immense pressure facing risk assets. Geopolitical concerns, uncertainty regarding Federal Reserve policy, and ongoing worries about the high valuations of technology stocks have led to a risk-averse sentiment dominating the market. The rebound of the U.S. dollar has further exacerbated the pressure on emerging markets. South Korean and Indonesian Markets Hit Hard The South Korean market has become the hardest hit in this round of sell-offs. The Kospi index followed the sharp decline of U.S. technology stocks on Friday, with a maximum single-day drop of 5.1%. The outflow of foreign capital has reached a historic high. On Thursday, international investors net sold $3.4 billion worth of South Korean stocks in a single day, breaking the previous record, reflecting a rapid contraction of global investors' exposure to technology stock risks. The significant correction in U.S. tech stocks directly impacted the South Korean market, where technology-weighted stocks hold a high proportion. Indonesian assets are also facing multiple pressures. The stock market benchmark index fell by 3% on Friday, and the yield on the benchmark 10-year government bonds surged to its highest level since September. The widening of credit default swap (CDS) spreads is the largest in over four months. Rating agency Moody's downgraded Indonesia's credit outlook, further undermining market confidence. Previously, MSCI Inc. also issued a warning regarding the investability of the country's stocks. Rajeev De Mello, global macro portfolio manager at Gama Asset Management, stated that the market pressure on Indonesian assets may "persist until investors see concrete measures addressing various market concerns," with local currency and bond investors looking for signs of fiscal discipline and central bank independence. Risk-Averse Sentiment Dominates the Market A sharp deterioration in risk appetite has become the main theme for emerging markets this week. Concerns over high valuations of technology stocks, geopolitical risks, and uncertainty regarding the Federal Reserve's policy path have collectively driven investors to withdraw from risk assets. The strengthening of the U.S. dollar has also intensified the pressure on emerging market currencies and assets. However, some market participants believe that the adjustment represents a healthy correction. Kiyong Seong, a strategist at Société Générale in Hong Kong, stated, "After this healthy adjustment, investors may become more selective, but I believe the stock market rebound is not over yet. The industrial and lifestyle transformations based on artificial intelligence are a multi-year transition process that will continue to support the earnings growth of key technology companies." The market is currently focused on whether policymakers in various countries will implement measures to stabilize market confidence and whether subsequent policy signals from the Federal Reserve can alleviate uncertainty