Nikkei 225, Kospi Both Post Biggest Monthly Drops Since Financial Crisis in March

TradingKey - During the Asian trading session on Tuesday, the Nikkei 225 Index closed down 1.6% at 51,063.72, with the index plunging 13.2% in March; the KOSPI Index closed down 4.3% at 5,052.46, falling 19.1% in March. Both recorded their largest monthly declines since October 2008. Risk sentiment in regional markets has deteriorated significantly.

This round of deep correction in Asia-Pacific stock markets was primarily driven by the dual impact of escalating geopolitical conflicts and a tightening global macro environment. The ongoing volatility in the Middle East and sharp swings in energy prices have significantly increased market uncertainty, causing safe-haven sentiment to rise rapidly and leading to concentrated sell-offs in risky assets.

At the same time, shifting interest rate expectations have also placed pressure on the market.

Against a backdrop where the inflation path remains unclear, market expectations for major central banks to maintain high interest rates or even tighten further have fluctuated. High-valuation assets have come under clear pressure, with the technology and export-oriented sectors bearing the brunt. Due to its heavy weight in semiconductors and cyclical industries, the South Korean market is particularly sensitive to changes in global liquidity, and its decline was significantly higher than the regional average.

From a market structure perspective, the widespread weakness in heavyweight stocks further amplified the index declines. Semiconductor leaders and large export enterprises continued to face capital outflows, which, coupled with pressure on the South Korean Won, formed a negative feedback loop of a "twin sell-off in stocks and currency," further weakening foreign investors' appetite for allocation.

In addition, technical factors should not be ignored.

Following previous gains, valuations in some Asia-Pacific markets had reached relatively high levels. Once external shocks emerged, investors were more inclined to quickly lock in profits and exit, amplifying short-term volatility. The MSCI Asia Pacific Index also recorded a significant decline this month, reflecting the characteristics of a regional systemic correction.

Market analysis suggests that the current environment is in a typical phase of "high uncertainty and low risk appetite," where short-term trends are highly dependent on developments in macro external factors. If geopolitical conflicts escalate further or the interest rate environment continues to tighten, Asia-Pacific stock markets may still face downward pressure; conversely, once risk factors subside, a technical rebound could occur.