Asian stocks retreated significantly on Monday, August 3rd, with South Korea's Kospi Index falling over 5% after a record 18% surge on July 31st. This decline was largely attributed to an AI-led sell-off and investor re-evaluation of high-valuation technology firms. Major chipmakers Samsung Electronics and SK Hynix, which together constitute over half of the KOSPI's market capitalization, tumbled more than 7% each, despite Samsung reporting a substantial increase in semiconductor profit and SK Hynix announcing strong quarterly results that still fell short of elevated expectations. The broader MSCI gauge of Asian shares lost 0.6%.
The sell-off in South Korean chipmakers also dragged down the MSCI Emerging Markets Index, which has fallen for three consecutive sessions, with South Korea accounting for the majority of the decline. This weakness followed a strong first half for emerging market equities, fueled by AI optimism, leading some analysts to question the sustainability of the AI buildout and the extent to which the recent EM rally was based on hype. The KOSPI has seen extreme volatility this year, with 32 of its 42 daily moves exceeding 5% in the past decade occurring in 2026.
Oil prices declined sharply, with Brent for October sliding as much as 7.3% to $81.55 a barrel. This drop was triggered by US President Donald Trump's announcement that fresh US-Iran talks would commence on Monday, raising optimism for a deal to reopen the Strait of Hormuz. A potential peace deal and the reopening of the strait could lead to "strong relief rallies across the market," according to Nick Twidale, chief market analyst at AT Global Markets. The yen strengthened for a fourth consecutive day, advancing as much as 1.4% to 155.23 per US dollar, as traders remained alert for coordinated intervention, while the Bloomberg gauge of the US dollar fell 0.2%.
Treasuries rose across the curve as the decline in oil prices eased inflation concerns, with the benchmark 10-year yield dropping four basis points to 4.69%. Gold climbed as much as 0.5% to around $4,070 an ounce. Other Asian markets also experienced declines, with Japan's Topix falling 1.2% and the Shanghai Composite dropping 0.6%, while Australia's S&P/ASX 200 and Hong Kong's Hang Seng remained largely unchanged.
