Tech stocks fall in Asia after record rally and new attacks in the Middle East
Osmond ChiaEconomic journalist
NurPhoto via Getty Images
South Korea’s stock market was forced to halt trading for 20 minutes after the Kospi index plunged nearly 9% minutes after Monday’s open.
The shutdown is part of a circuit breaker mechanism designed to prevent panic trading and was triggered for the third time this year after a sharp selloff in technology stocks.
Japan’s Nikkei 225 index fell about 4.5% – its highest level in three months – as shares of major technology companies fell.
Oil prices also rose on Monday, fueling inflation fears, after Iran and Israel exchanged strikes for the first time since a ceasefire was agreed between the two sides and the United States in April.
Traders are nervously watching a “messy mix” of several market shocks, mostly linked to the technology sector and accelerated by rising energy prices, said Charu Chanana, Saxo’s chief investment strategist.
Technology stocks have seen strong gains in recent weeks, but investors are “repositioning” over fears that investments in artificial intelligence are overvalued, she said.
Markets like the Kospi and the Nikkei are particularly exposed to such shocks given that their exchanges are dominated by technology stocks.
Part of Friday’s decline followed fears of rising U.S. interest rates, due to a lower-than-expected U.S. unemployment rate in April as well as still-high inflation linked to the war in the Middle East.
Trading in South Korea has resumed since the circuit breaker was triggered, with the Kospi index down about 7.9% as of early afternoon.
The stock prices of major South Korean technology companies were down sharply, including those of chipmakers Samsung and SK Hynix.
South Korean President Lee Jae-myung said Monday the stock market is expected to see volatility, but he believes domestic stocks remain “slightly undervalued.”
Overall, the tech-heavy Kospi has seen huge gains in recent months due to a wave of investment in the country’s tech companies.
Investors are more looking for clear signs that demand for AI has translated into “real revenue,” Chanana said. “The burden of proof has increased.”
Other Asian stock markets, such as the Hang Seng Index and the Shanghai Composite, were also lower on Monday.
Taiwan’s Taiex also fell sharply after shares of semiconductor giant TSMC fell 3%. The chipmaker is a key supplier to Nvidia, whose boss, Jensen Huang, said the recent decline in technology stocks presented a buying opportunity for investors.
The price of global benchmark Brent surged A barrel in Asia rose 4.6% to $97.34 (£73.05) on Monday, while US-traded crude rose 4.3% to $94.40 after the exchange of strikes between Iran and Israel.
Tehran warned that these attacks were the start of a a full week of strikes and constitute a response to a “repeated violation” of the ceasefire agreed on April 17 between the United States, Israel and Iran.
Israel then retaliated by launching attacks on military targets in Iran, although US President Donald Trump urged the country not to retaliate.
“We’re very close to a final deal with Iran. It’s going to be a good deal. I don’t want it to blow up because of what’s happening now,” Trump told Axios.
It is too early to say whether the strikes mark a full escalation of the war, but traders are once again assessing the risks to global oil markets, said Associate Professor Jiajia Yang of James Cook University in Australia.
The strikes show that many political issues remain unresolved and oil prices are expected to be volatile unless diplomatic efforts succeed, Yang said.
Oil prices have jumped since the US and Israeli strikes on Iran on February 28 and continued to make huge changes throughout the ceasefire that followed.
Prices have hovered around the $95 mark over the past week as traders assess the long-term impact of the conflict on global energy flows.
The war disrupted the flow of oil and gas from the Gulf after Iran threatened to strike ships trying to pass through the crucial Strait of Hormuz trade route, in retaliation for U.S.-Israeli attacks.
