Monaco Journal - Seoul's Kospi stock index tanks 10% to lead tech-fuelled Asia rout

While Washington and Tehran flagged progress at peace negotiations in Switzerland, traders are struggling to build on last week's rally sparked by news of a deal to end the Middle East conflict.

Tech firms -- the main driver of a surge across world markets as investors pile into all things AI -- took a painful hit in Asia.

South Korean chip giants SK hynix and Samsung tumbled more than 12 percent each to drag the Kospi index 10 percent, having finished Monday at a record high.

"The move appears to reflect South Korean semiconductor stocks having risen too far, too fast, prompting aggressive selling by both foreign investors and domestic institutions," Joo Won, head of the economic research division at Hyundai Research Institute, told AFP.

"The scale of the decline also appears excessive. More importantly, the sell-off could signal that investors are beginning a broader process of reducing their positions. In other words, there may still be considerable selling pressure waiting in the wings.

"Having accumulated sizable gains during the rally, many investors could be inclined to cash out first and reassess later."

Tokyo also took a hiding, shedding 3.6 percent, with tech investment titan SoftBank down more than 10 percent and chipmaker Tokyo Electron 6.2 percent lower.

Hong Kong sank more than two percent, while Shanghai and Taipei also suffered strong selling pressure.

Sydney, Singapore, Wellington, Mumbai, Bangkok and Jakarta were sharply down.

London, Paris and Frankfurt all opened on the back foot.

The rout followed a sharp drop on Wall Street, where the Nasdaq sank more than one percent as market giants Amazon, Nvidia and Microsoft were sharply down.

But the main victim of the day was Elon Musk's SpaceX, which plunged more than 16 percent -- wiping hundreds of billions off its valuation -- after a record IPO and a winning trio of opening trading sessions.

The fall came as the rocket and satellite company disclosed plans for an "inaugural" bond offering of unspecified quantity.

The SpaceX disclosure arrives on the heels of a large equity round announced earlier this month by Google parent Alphabet and a data centre venture between Microsoft and Chevron, developments which underscore the hefty capital toll of the artificial intelligence drive.

Monday's selling revived worries about the wisdom of the vast sums being pumped into artificial intelligence with little sign of any returns being made soon.

Traders are also fretting over the extended valuations of some firms, with Nvidia topping $5 trillion.

"While the sector has performed exceptionally well, valuations have become stretched and the bar is now materially higher than it was a few months ago," wrote Tony Sycamore at IG.

"Questions around capital expenditure and returns on artificial intelligence spending remain unanswered. While names like Intel and Micron are hitting fresh record highs, the Magnificent Seven (of top tech firms) has lost considerable momentum in recent weeks.

"Amazon and Nvidia are trading around 12 percent below their recent peaks, while Microsoft and Meta Platforms sit not far above their March lows."

Oil prices sank more than one percent, extending Monday's sharp drop that came after the US Treasury said it was temporarily lifting sanctions on Iran to allow it to produce, sell and deliver crude oil and related products through August 21.

Maritime trackers also pointed to an uptick in tanker traffic through the Strait of Hormuz.

US Vice President JD Vance said a "very good foundation" had been laid for negotiations towards a final deal and that Iran would allow UN nuclear inspectors to return to the country.

Iranian Foreign Ministry spokesman Esmaeil Baqaei said for his part that "a very brief discussion took place regarding the nuclear issue, but there was no discussion of details".

President Donald Trump said the strait, the critical channel for much of the world's oil, is now "totally open" to shipping after Iran closed it in response to US and Israeli forces bombing the country late February.

"We're negotiating -- we'll see how that all goes -- but we have two things," Trump said. "We have an open strait and we have a country that will never have a nuclear weapon."

Attention is also on Tokyo as the yen sits just below a 40-year low against the dollar following the Federal Reserve's hawkish turn last week and concerns the Japanese central bank might not be doing enough to fight inflation.

Traders are also keeping tabs on developments after NHK and Kyodo News said Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent had spoken about exchange rates.

The reports helped the yen recover from a low of 161.93 per dollar, just short of the 161.96 last seen in December 1996.

Japanese authorities spent more than $70 billion last month propping up the currency as it weakened against the greenback.

- Key figures around 0715 GMT -

Seoul - Kospi: DOWN 10.0 percent at 8,203.84 (close)

Tokyo - Nikkei 225: DOWN 3.6 percent at 69,788.38 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 23,263.41

Shanghai - Composite: DOWN 1.4 percent at 4,106.25 (close)

London - FTSE 100: DOWN 0.7 percent at 10,361.44

West Texas Intermediate: DOWN 1.5 percent at $72.77 a barrel

Brent North Sea Crude: DOWN 1.6 percent at $76.65 a barrel

Pound/dollar: DOWN at $1.3231 from $1.3244 on Friday

Euro/dollar: DOWN at $1.1422 from $1.1425

Dollar/yen: DOWN at 161.68 yen from 161.66 yen

Euro/pound: UP at 86.32 pence from 86.23 pence

New York - Dow: UP 0.3 percent at 51,712.71 (close)

E.Fournier--MJ