South Korean shares plunged over 5% amid profit-taking in chip stocks and oil price concerns, while Japan's Nikkei declined modestly as earnings season began.
Market Overview
Asian equity markets opened the week under pressure, with South Korea's KOSPI index tumbling nearly 6% intraday before closing down 5%, its steepest drop in nearly two months. The decline was driven by profit-taking in semiconductor stocks following SK Hynix's blockbuster Nasdaq debut, compounded by rising oil prices amid escalating Middle East tensions. Japan's Nikkei share average fell 1.1% by midday, as investors balanced higher input costs against the start of corporate earnings season.
Key Drivers
The selloff in Seoul was led by SK Hynix, which dropped 10% after its U.S. listing surge, and Samsung Electronics, which fell 6% amid lingering concerns over the memory chip cycle's sustainability. Foreign investors sold Korean equities worth approximately 1 trillion won, while the won weakened to 1,505 per dollar. Bond yields rose modestly, with 3-year and 10-year benchmarks up 5 basis points each.
In Tokyo, chip-related stocks such as Advantest and Tokyo Electron declined 1-1.5%, while robot maker Yaskawa Electric plunged 14% after reporting a sharp Q1 profit drop. Banking shares, including Mitsubishi UFJ and Sumitomo Mitsui, rose over 2%, providing some support to the broader Topix index.
Forex and Risk Sentiment Implications
The Korean won's depreciation reflects broader risk aversion, with investors reassessing exposure to cyclical sectors amid volatile commodity prices. The KRW's weakness could pressure emerging market currencies if oil-driven inflation persists. Meanwhile, the Nikkei's modest decline suggests cautious optimism around Japanese corporate earnings, though rising energy costs may compress margins.
Technical Context
South Korea's market triggered a temporary trading halt due to the sharp intraday drop, highlighting algorithmic trading vulnerabilities during high volatility. The divergence in performance between chip stocks and domestic cyclicals in Japan signals a potential sector rotation as investors seek safer havens amid geopolitical uncertainty.
Outlook for USDKRW
The USDKRW pair faces near-term downside risks if oil prices remain elevated, increasing import costs for energy-dependent economies. However, any stabilization in chip stocks or easing Middle East tensions could provide support to the won. Traders should monitor upcoming earnings reports and central bank policy signals for directional cues.
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