Asia stocks drop as Japan, South Korea chipmakers decline

KOSPI pared earlier losses to trade down 0.5%, while Nikkei 225 declined 0.3%

Japan and South Korea’s technology-heavy stock markets dropped sharply on Monday as investors locked in gains across semiconductor shares following last week’s rally, while lower oil prices and easing geopolitical tensions underpinned selective gains elsewhere in the region.

Asian technology investors largely took a breather after last week’s sharp rebound, with attention shifting from macro drivers toward the upcoming earnings season to assess whether massive investment in artificial intelligence infrastructure is translating into stronger corporate profits.

South Korea and Japan once again dictated regional sentiment, with investors trimming exposure to semiconductor stocks after Friday’s aggressive rebound from last week’s AI-driven selloff.

KOSPI pared earlier losses to trade down 0.5%, while Nikkei 225 declined 0.3%. Shanghai Shenzhen CSI 300 and the Shanghai Composite shed 0.6%, suggesting investors remained cautious toward technology shares despite improving international risk sentiment.

Profit-taking returned to much of Asia’s semiconductor complex after last week’s rebound, although pockets of strength remained. Samsung Electronics Co Ltd slid 0.9% and SK Hynix Inc slipped 4.3% in Seoul, while MediaTek Inc dropped 1.4% in Taipei.

Nvidia’s largest AI server assembly partner, Hon Hai Precision Industry Co Ltd, bucked the broader trend, gaining 0.6% after posting record June and second-quarter revenue driven by strong AI server demand. Taiwan Semiconductor Manufacturing Co. also edged 0.6% higher, although gains in heavyweight exporters were not enough to lift the broader Taiwan Weighted, which was little changed.

Oil prices remained under pressure after OPEC+ agreed another production increase for August, adding to earlier output hikes and reinforcing expectations of ample global supply. The prospect of cheaper energy has improved the inflation outlook and helped underpin broader risk sentiment despite weakness in semiconductor shares.

Hang Seng added 0.9%, while Indonesia’s Jakarta Stock Exchange Composite Index rose 0.8% and S&P/ASX 200 was little changed. FTSE Malaysia KLCI advanced 0.2% and Nifty 50 added 0.7%.

Looking ahead, investors will focus on a busy week for regional macro data. DBS expects Bank Negara Malaysia to keep its policy rate unchanged, while inflation readings from Thailand, China, Taiwan and the Philippines will be scrutinised for clues on price outlook. The bank expects inflation to accelerate in Thailand, remain broadly steady in China and Taiwan, and ease only slightly in the Philippines.

The Reserve Bank of New Zealand is widely expected to raise its benchmark cash rate by 25 basis points to 2.50% at Wednesday’s policy meeting, which would mark its first rate increase since mid-2023.