Asian stock markets experienced notable declines as investors engaged in profit-taking, particularly in the technology and AI sectors, following a week of substantial gains. Japan's Nikkei 225 fell by $4.4\%, and South Korea's Kospi saw the steepest drop among Asian markets, plunging by $7.7\%. Hong Kong's Hang Seng Index declined by $1.9\%, and China's Shanghai Composite Index experienced a $2.1\% downturn, reflecting a general negative shift in investor sentiment across the region.
Market analysts attribute this correction to investors securing their earnings after AI-related stocks reached new heights in recent trading. The downturn was primarily led by Japan and South Korea, which were at the forefront of the sell-off. For instance, chip-testing equipment maker Advantest fell $2\% ahead of its earnings, and memory chipmaker Kioxia Holdings lost $2.6\%.
While some markets saw gains on Monday due to falling oil prices and easing geopolitical tensions, the Friday decline underscores a different sentiment. Brent crude dropped more than $5\% to around $92 a barrel, and U.S. West Texas Intermediate fell about $5\% to roughly $85 a barrel as traders reduced geopolitical risk premiums built into the market. This oil price retreat eased concerns about inflation ahead of central bank decisions from the Group of Seven economies. Despite easing geopolitical fears providing a "relief rally" for some indices on Monday, the underlying jitters around AI stock valuations contributed to the earlier decline.
