Trading on South Korea’s Kospi index was suspended for 20 minutes on Monday after the benchmark plunged nearly 9% within minutes of opening, the third time this year the circuit breaker mechanism has been triggered. The index closed 8.3% lower, dragged down by chipmakers Samsung Electronics and SK Hynix, whose shares dropped 10% and 6% respectively. The sell-off in Asia came after a steep drop in US tech stocks on Friday, when the Nasdaq lost nearly 5% of its value, its biggest one-day fall in more than a year. Japan’s Nikkei 225 index fell 3.9%, Hong Kong’s Hang Seng dropped 1.5%, and European markets also traded lower, though with smaller falls. The UK’s FTSE 100 reversed early losses to trade slightly higher, while US markets recovered some ground on Monday, with the Nasdaq closing up 0.9% and the S&P 500 up 0.3%.
Investors are nervous about a “messy mix” of shocks, said Charu Chanana, chief investment strategist at Saxo. “The burden of proof has gone up” for AI firms, as investors reposition over fears that investments in artificial intelligence may be overvalued, she added. The sell-off was compounded by a rise in oil prices after Iran and Israel exchanged strikes for the first time since a ceasefire agreed in April. Brent crude jumped nearly 5% to $97.60 a barrel before retreating to $94.60 after Iran announced it was halting military operations against Israel, following a call from Donald Trump for both sides to “immediately stop shooting”. The volatility in oil prices fuelled inflation concerns, adding to the anxiety sparked by a stronger-than-expected US jobs report on Friday, which raised the prospect of interest rates staying high or even climbing further.
“South Korea's Kospi trading halted after plunging 9% amid tech sell-off and oil price surge from Iran-Israel strikes.”
South Korean President Lee Jae-myung said the stock market was expected to experience volatility but that domestic shares were still “slightly undervalued”. In Europe, shares in companies at the heart of the AI boom fell sharply: BE Semiconductor Industries dropped 4.5%, ASML fell 3.2%, and Aixtron lost almost 6%. Rolls-Royce and IAG were among the biggest fallers on the FTSE 100, while oil companies BP and Shell rose. The declines follow a strong run for tech stocks in recent weeks, but investors are now looking for clear signs that AI demand has translated into “real revenue”, Chanana said. “The burden of proof has gone up.”