Asian stocks trade lower on renewed US-Iran war tensions, South Korea’s KOSPI leads losses
- Asian stocks edge lower on Monday.
- Escalating tensions in the Middle East drive oil prices higher and dampen investor appetite for risk.
- South Korea's benchmark KOSPI fell by 7.95%, with SK Hynix shares slumped 11%.
Most Asian equities trade in negative territory on Monday amid renewed geopolitical tension in the Middle East after reports of US-Iran airstrikes and Tehran's closure of the critical Strait of Hormuz.
The United States (US) and Iran traded airstrikes over the weekend, with Tehran targeting US facilities in multiple Gulf countries and declaring the Strait of Hormuz closed. The US military said in a social media post that the strikes were designed to limit Iran’s ability to attack civilian ships in the Strait of Hormuz, adding that US President Donald Trump “has directed the strikes to hold Iranian forces accountable.”
The South Korean stock, the benchmark KOSPI, fell more than 7.95% to 6,880 as heavyweight chipmakers came under renewed pressure. Samsung Electronics shares slid nearly 7%, while SK Hynix slumped 11%.
Meanwhile, the Nikkei 225, Japan’s benchmark, tumbles 2.20% to 67,040. Japan’s Finance Minister Satsuki Katayama said on Friday that the government is pursuing measures that would include the Government Pension Investment Fund (GPIF) to make "substantially greater investments in Japanese financial assets.
China and Hong Kong stock markets lose momentum on Monday, with the SHANGHAI, China’s main stock market index, dropping by 1.70% to 3,930. The Hong Kong Stock Exchange increased by 0.1% to 24,200.
India’s Nifty50 was down 0.27% to trade at 24,141 on Monday. In Taiwan, the Taiex rose by 0.39% to 45,540. Other markets in Southeast Asia trade lower.
Asian stocks FAQs
Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices.
Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce.
Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities.
Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.
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