Asian stock markets experienced widespread declines on Thursday, led by a sharp sell-off in technology shares as investors reduced their exposure to the sector after a prolonged rally. The downturn was particularly pronounced in South Korea, where the Kospi index fell nearly 8%, marking a significant reversal following its strong performance in the first half of the year.
Chipmakers bore the brunt of the selling pressure, with SK hynix dropping over 14% and Samsung falling more than 9% in Seoul. In Tokyo, the stock of chipmaker Kioxia briefly declined by approximately 13.5%. The sell-off was attributed to a combination of factors, including margin calls on borrowed investments by retail traders and reports that Apple is in negotiations to source chips from two Chinese manufacturers, affecting demand expectations for established South Korean producers.
Analysts noted that while companies like Samsung, SK hynix, and Kioxia remain strategically important within the industry, the confluence of high leverage, momentum-driven trading, and crowded market positioning has intensified the pullback. The broader impact was felt across other markets in Asia, including Shanghai, Wellington, and Taipei, which also posted losses. However, key cities such as Hong Kong, Singapore, Manila, and Jakarta registered gains despite the technology sector downturn.
The retreat in equities comes amid lingering uncertainty about the sustainability of the artificial intelligence-driven rally that has propelled stocks to record levels over the last two years. Concerns over stretched valuations, potential delays in realizing returns on large investments, and the possibility of rising borrowing costs have unsettled investors at the start of the new quarter.
Adding some support to markets, Federal Reserve Governor Kevin Warsh spoke at the European Central Bank’s annual Forum on Central Banking in Sintra, Portugal, highlighting a recent easing in inflationary pressures. He noted that inflation expectations and risks had declined over the past several weeks but reaffirmed the Fed’s commitment to achieving its two percent inflation target. His comments came ahead of U.S. employment data scheduled for release on Thursday, which could influence future monetary policy decisions. Payroll services firm ADP reported that private-sector job growth in the United States slowed in June, with 98,000 new positions added versus expectations of 120,000.
In commodity markets, oil prices extended a decline amid ongoing diplomatic talks between the United States and Iran aimed at resolving regional conflicts and ensuring the uninterrupted flow of crude through the Strait of Hormuz, a critical chokepoint accounting for about one-fifth of global oil shipments. Supply through the waterway reportedly exceeded 10 million barrels per day during this period. Nonetheless, some market observers cautioned that lower oil prices should not be seen as definitive evidence that inflationary pressures are easing, citing other persistent factors such as wage growth, services inflation, tariffs, supply-chain disruptions, and fiscal policies that could sustain upward price momentum. Potential setbacks in diplomatic negotiations or renewed tensions in the region could also reinstate a geopolitical premium on oil prices.