Asian stock markets fell on Monday, led by a sharp decline in South Korea, as renewed pressure on artificial intelligence-related technology shares more than offset improved risk sentiment stemming from reduced Middle East tensions and firmer U.S. futures.
Crude oil slid after U.S. President Donald Trump said negotiations over the Strait of Hormuz would begin on Monday, raising hopes of a diplomatic opening with Iran and easing near-term concerns about disruptions to energy flows. The retreat in oil prices weighed on energy producers across the region.
Wall Street momentum offered limited support after robust results from Microsoft and Alphabet lifted U.S. equities on Friday. In Asian trade, Nasdaq 100 futures were up about 0.9% and S&P 500 futures rose roughly 0.5%, but that strength proved insufficient to offset losses in AI-heavy names in some Asian markets.
South Korea - KOSPI reverses sharply after record rally
South Korea's KOSPI fell 4.2% following a record 18% surge on Friday, as investors resumed selling the market's largest AI-exposed technology firms. The index had already experienced a 22% drop in July, its steepest monthly fall since the 2008 financial crisis, driven by valuation concerns around AI-related equities.
Samsung Electronics shares declined about 7.2% despite the company reporting a more than 250-fold jump in semiconductor profit and announcing multi-year supply deals with major data-centre operators. SK Hynix also dropped around 7% as investors re-evaluated its record quarterly results that fell short of elevated expectations. Together, those two chipmakers represent over half of the KOSPI's market capitalization, amplifying the index move.
Japan and China - Mixed performance as policy cues and product news diverge
Japan's equity markets traded lower after the Bank of Japan last week signalled expectations for gradual policy normalisation while keeping interest rates unchanged. The Nikkei 225 fell about 1.6% and the broader TOPIX declined more than 2%. Within Japan, Sony Group shares dropped nearly 6%, and other electronics suppliers, including Murata Manufacturing and Renesas Electronics, also fell, though Kioxia Holdings gained almost 7% and TDK Corp. rose more than 4%.
Chinese markets showed some resilience despite weakness in regional technology names. The Shanghai Shenzhen CSI 300 lost 0.6% and the Shanghai Composite slipped 0.5%. In Hong Kong, the Hang Seng eked out a modest gain of around 0.3% as Alibaba jumped more than 5% after unveiling a new flagship AI model, and Tencent climbed over 2% on the same theme.
Energy and Australia - Oil retreat dents producers while Australia outperforms
Brent crude extended losses from Friday after the comments regarding the Strait of Hormuz, reducing near-term inflation worries tied to energy. That dynamic pressured regional energy names: Australia's Woodside Energy fell roughly 3%, Santos lost more than 2%, and Japan's INPEX Corp. declined about 2% alongside weaker oil prices.
Australia's S&P/ASX 200 outperformed the region, rising about 0.5% as gains in financial and industrial sectors more than offset the weakness in energy stocks. Separately, data cited in the market noted Australian home prices fell for a second consecutive month in July, reflecting higher borrowing costs and uncertainty tied to proposed tax changes, which has accelerated the housing downturn.
Near-term focus - Policy decisions and economic data ahead
Market attention is turning to the Reserve Bank of India's upcoming policy decision later in the week, with Nifty 50 futures rising about 0.4% as investors positioned ahead of the announcement. Economists at DBS expect the RBI to leave interest rates unchanged and maintain a balanced stance, citing easing food inflation as providing room to pause.
Additional data moving markets in the days ahead will include China's July trade figures, South Korea's inflation report, and Friday's U.S. nonfarm payrolls report.