Asian equity markets closed broadly lower on Monday as a global technology stock selloff and an 8.3% crash in South Korea's KOSPI index spread risk aversion across the region, compounded by escalating Middle East tensions and lingering concerns over persistently high US interest rates.
The coordinated decline mirrored Friday's sharp reversal on Wall Street, where semiconductor and AI-related equities came under heavy selling pressure after stronger-than-expected US employment data reinforced expectations that the Federal Reserve could raise rates again before year-end.
Malaysia Close
The FTSE Bursa Malaysia KLCI fell 0.82% to 1,679.52, declining for a third consecutive session and extending its monthly loss to 3.77%. The benchmark index remains 10.54% higher year-on-year, though the recent pullback has erased a portion of the gains accumulated through May. Trading remained cautious as regional sentiment dominated domestic drivers, with investors watching the ringgit closely amid broader dollar strength.
Hong Kong Close
The Hang Seng Index tumbled 305 points, or 1.22%, to close at 24,585, marking its lowest level since late March. Technology and semiconductor-related shares led the decline, tracking the broader global AI-driven market correction. Tencent fell 1.5%, SMIC dropped 4.1%, AIA Group declined 1.8%, Lenovo slipped 1.3%, and Meituan lost 3.5%. Market participants characterised the pullback as largely profit-taking rather than a response to deteriorating fundamentals.
China Close
The Shanghai Composite tumbled 1.70% to 3,959, its lowest level in two months, while the Shenzhen Component slumped 3.22% to 14,821 — a more than one-month low. Technology stocks bore the brunt of selling pressure, with Zhongji Innolight down 2.12%, Eoptolink Technology losing 3.07%, and NAURA Technology shedding 2.92%. Investors are awaiting China's trade and inflation data due later this week for fresh signals on economic momentum amid external headwinds. Separately, Chinese President Xi Jinping arrived in North Korea on his first visit since 2019.
Japan Close
The Nikkei 225 plunged 3.85% to close at 64,024, while the broader Topix declined 2.45% to 3,852, marking a third consecutive session of losses. Japanese chipmakers led the rout: Kioxia Holdings fell 8%, Murata Manufacturing dropped 10.2%, SoftBank Group declined 6.1%, Advantest lost 5.7%, and Tokyo Electron shed 7.5%. The selloff was amplified by yen weakness beyond 160 per dollar — a level widely seen as a potential trigger for further government currency intervention.
Korea KOSPI Crashes 8.3%
South Korea's KOSPI suffered its sharpest single-day decline in months, crashing 8.29% to 7,484 — a more than two-week low — as global technology pessimism and geopolitical uncertainty triggered heavy institutional selling. Samsung Electronics plunged 10.18%, SK Square fell 11.13%, Hyundai Motor dropped 9.43%, SK hynix declined 7.25%, and LG Energy Solution lost 6.40%. In a notable counterpoint, Nvidia announced a multi-year AI partnership with SK hynix and expanded ties with Korean firms, reinforcing expectations for sustained demand for advanced memory chips.
Other Asia
Singapore's Straits Times Index fell 1.71% to 4,963.67. India's BSE Sensex declined 0.97% to 73,524, its lowest since early April, with Eternal down 3.2% and IndiGo dropping 2.6% on Airbus delivery concerns. Technology stocks including TCS (-2.1%) and Infosys (-0.8%) also weakened. Australia's ASX was closed for the King's Birthday public holiday.
Currencies Wrap
The US Dollar Index (DXY) was steady at 100.02, down a marginal 0.05%, though it remains up 2.11% over the past month. The USD/MYR held at 4.0296. The Japanese yen weakened beyond 160 per dollar at 160.17, a level that observers say could prompt further Bank of Japan intervention. The offshore yuan edged firmer to around 6.78 per dollar, showing resilience as one of the better-performing emerging market currencies year-to-date.
Commodities Day Wrap
WTI crude oil rose 0.68% to $91.15 per barrel after spiking to $95 earlier in the session, before easing on signals that Iran had halted military operations against Israel. Gold traded at $4,327.75 per ounce, down 0.08%, trimming earlier losses after hitting its lowest level since March 23. The precious metal remains under pressure from rising rate-hike expectations.
US Pre-Market Setup
US futures pointed to a recovery in the evening session, with the S&P 500 up 0.3% and the Nasdaq advancing 0.9% as chip stocks rebounded. Nvidia gained 1.7%, Broadcom climbed 2.8%, AMD surged 5.1%, and Micron Technology jumped 9.9%. Tesla rose 4.6%. In contrast, Apple declined 1.9% after its next-generation AI platform drew a lukewarm investor response. Markets are focused on Wednesday's US CPI release and Thursday's PPI data for further signals on Federal Reserve policy direction.
Day's Verdict
Monday's session underscored the fragility of the AI-driven equity rally when confronted with a hawkish Fed repricing and active geopolitical conflict. The KOSPI's 8.3% crash was the clearest signal that leveraged technology positions are being unwound rapidly across Asia. Yet the divergence between Asia's rout and US futures stabilisation suggests the day's damage is concentrated in crowded semiconductor trades rather than a broader economic deterioration. The critical question now is whether this is a technical correction within a bull market or the beginning of a more sustained repricing of growth expectations in a higher-rate environment.
What to Watch Tonight
- US CPI data (Wednesday MYT morning): Markets now assign 70% probability to a December rate hike; a hot print could push that higher and extend the tech selloff.
- Iran-Israel ceasefire durability: Trump has called for an immediate ceasefire; any resumption of military exchanges would immediately re-ignite oil and risk volatility.
- Yen intervention watch: With USD/JPY above 160, Japanese authorities face renewed pressure to defend the currency, particularly after record foreign reserve declines in May.
- China trade data: Due later this week, it will test whether China's import pullback is structural (inventory drawdown) or cyclical (weak demand).
- KOSPI follow-through: Whether Tuesday's open in Seoul stabilises or triggers a further leg down will determine if this is a one-day flush or the start of a sustained derating.
