Asian Stocks Mostly Decline, Kospi Strengthens Against Trend, Markets Focus on Upcoming Nvidia Earnings

Tradingkey - On Monday, Asian stock markets mostly declined, with technology stocks leading the losses. Tensions between the U.S. and Iran escalated over the weekend, while rising safe-haven demand and higher oil prices both weighed on market sentiment.

U.S. Treasury yields rose to historic highs last Friday, putting pressure on all U.S. tech stocks. As of press time, U.S. stock index futures remain under pressure. Additionally, the market is awaiting results from AI giant NVIDIA ( NVDA ), which is scheduled to report earnings this Wednesday (May 20). Investors are looking to the report to gauge whether the AI-driven rally in global equity markets can be sustained.

KOSPI opened lower today but trended upward, at one point falling more than 4% in early trading before recovering its losses. By the close, it rose 0.31% to 7,516.04 points.

On the news front, according to data from Goldman Sachs, overseas investors withdrew approximately $17 billion from emerging Asian markets (excluding China) last week, marking the second-largest weekly outflow on record. South Korea accounted for the vast majority of this, with outflows reaching $13.2 billion.

Citi stated that the South Korean market now "looks much more overbought than the U.S. market," prompting the bank to trim its exposure to bullish South Korean trades. This is due to more warning signs of "frenzy" appearing among domestic retail investors. This group has become the primary buyers of South Korean stocks this year, often flocking to buy through margin trading and leveraged exchange-traded funds (ETFs).

The institution further noted that this does not mean the KOSPI rally is over, "but it does mean that risks have increased."

Among heavyweight stocks, Samsung Electronics bucked the trend today, closing up 3.88% at 281,000 won. SK Hynix rose 1.15% to 1.84 million won.

Regarding the latest strike news, the Samsung union will participate in a second round of government-mediated negotiations, and a South Korean court partially granted Samsung's request for an injunction against the union, requiring Samsung's business operations to be maintained at normal levels. Recently, Samsung Electronics Chairman Lee Jae-yong publicly apologized for the company's escalating labor disputes and bowed three times to customers and the South Korean public—a rare gesture for the leader of a major conglomerate when handling internal union conflicts.

The union's current demands primarily focus on Samsung's performance bonus system. Among other measures, the union is calling for performance bonuses to be increased to 15% of Samsung's operating profit, the removal of bonus payment caps, and the establishment of a formal bonus structure.

Samsung management has proposed allocating 10% of operating profit for bonuses and providing a one-time special compensation package.

Nikkei 225 fell for a third consecutive day, closing down 0.97% at 60,815.95 points. It touched an intraday high of 61,478.55 and a low of 61,299.87, hitting its lowest level in over a week.

In terms of news, Morgan Stanley interest rate strategists stated in a report that as market focus shifts from inflation to economic growth, the belly of the Japanese government bond (JGB) yield curve is expected to outperform other maturities. They anticipate that the 10-year JGB yield will drop to 2.1% by the fourth quarter of 2026; London Stock Exchange Group data shows the yield currently stands at 2.74%. Strategists believe the long end of the yield curve will continue to lag due to a lack of domestic investor demand. They noted that the Bank of Japan's policy path currently implied by market pricing is more hawkish than Morgan Stanley's subjective probability-weighted path and survey-based forecasts, suggesting a significant inflation risk premium in the market. "We expect this premium to fade by the fourth quarter of 2026, pulling the 10-year JGB yield down to 2.10%. Subsequently, as oil prices stabilize and the Bank of Japan resumes rate hikes, the yield will gradually recover to reach 2.30% by the fourth quarter of 2027."

Among heavyweight stocks, Kioxia rose 15.75%, and Recruit Holdings surged 16.58%. On the downside, Toyota fell 4.05%, SoftBank declined 3.29%, and Fast Retailing slipped 2.01%.

Japan's Kioxia recently announced plans for a U.S. listing, as the company benefits from a global memory chip shortage that has pushed prices of this critical component to record highs. The company stated it expects operating profit for the quarter ending in June to reach 1.3 trillion yen (approximately $8.2 billion), exceeding average analyst estimates. Furthermore, the company reported a record profit of 596.8 billion yen for the quarter ending in March, also beating market expectations. The rapid growth of the Tokyo-based company reflects the surge in memory demand driven by hyperscale data center operators racing to build out artificial intelligence infrastructure.

TAIEX closed down 0.68% at 40,891.82 points, falling 280.54 points from the previous trading day. TSMC closed down 1.1% today at NT$2,240.