San Francisco Frontiers - Tech firms bear brunt of selling as Asian stocks drop

Seoul and Tokyo again bore the brunt of the selling as chip giants SK hynix, Samsung and Kioxia took another beating owing to a sharp exit from a sector that saw blistering gains in the first half of the year.

Since June's record highs, traders have been questioning elevated valuations and when companies would see returns -- if any -- on the colossal sums they have spent to get ahead in the artificial intelligence race.

Unease over some firms' debt levels has also started to raise eyebrows as interest rates around the world rise, putting pressure on their finances.

In early trade, South Korea's Kospi sank more than four percent at one point, with SK hynix and Samsung shedding more than three percent and one percent respectively.

The Nikkei 225 in Tokyo dropped around one percent as Kioxia shed nearly two percent and tech investor SoftBank plunged more than five percent.

Taiwan's TSMC was also in the red, though the country's Taiex inched slightly higher.

There were also losses in Hong Kong, Shanghai, Sydney, Singapore, Wellington and Manila.

The selling came despite a positive day on Wall Street, where the Nasdaq was pushed solidly higher by gains in Amazon, Microsoft and Nvidia. The closely watched Philadelphia Semiconductor Index climbed 1.6 percent, breaking eight days of losses, according to Bloomberg.

Focus is now on the release of earnings results, with Meta and Tesla due this week.

However, analysts pointed out that investors are expecting better and better reports to justify valuations.

"The market is no longer trading the headline numbers in isolation," said Stephen Innes at SPI Asset Management. "It is trading the gap between what companies earn today and what they still have to spend to keep the AI machine humming tomorrow."

That, he said "makes the post-earnings move increasingly an exercise in guidance and corporate-outlook gymnastics, where a perfectly respectable quarter can still get tossed overboard if the capex bill, margins or forward return profile fails to clear a bar that has been raised almost absurdly high."

And Pepperstone's Chris Weston added: "The market doesn't need every AI infrastructure company to succeed.

"It does, however, need confidence that the enormous capital being deployed will generate returns above the cost of funding it. Without that confidence, rallies risk becoming opportunities to reduce exposure rather than rebuild it."

Oil prices edged up, with Brent hovering around $110 a barrel and West Texas Intermediate near $104, amid worries over Iranian attacks in the Strait of Hormuz.

First Vice President Mohammad Reza Aref said Tehran had to impose its control of the waterway -- through which a fifth of oil and gas usually passes -- to maintain its security, state-run news agency IRNA said.

He said friendly nations could enjoy safe passage, but the United States "is now the cause of the current situation and must pay the price".

The remarks offset signs that crude shipments were sitting near pre-war levels.

On currency markets, the euro held steady against the dollar but remained under pressure as France and Italy were rocked by violent cost-of-living protests that have raised concerns about their economies and pushed up government bond yields.

Stock markets in both countries sank more than one percent Monday.

- Key figures at around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.6 percent at 64,512.35 (break)

Seoul - Kospi: DOWN 2.8 percent at 5,607.95

Hong Kong - Hang Seng Index: DOWN 1.1 percent at 23,926.81

Shanghai - Composite: DOWN 0.2 percent at 3,722.56

West Texas Intermediate: UP 0.2 percent at $103.82 per barrel

Brent North Sea crude: UP 0.2 percent at $109.74 per barrel

Euro/dollar: UP at $1.1218 from $1.1211 on Monday

Pound/dollar: UP at $1.3316 from $1.3304

Dollar/yen: UP at 158.58 yen from 158.55 yen

Euro/pound: DOWN at 84.25 pence from 84.27 pence

New York - Dow: DOWN 0.1 percent at 51,966.03 (close)

London - FTSE 100: DOWN 1.1 percent at 10,764.69 (close)

M.Hill--SFF