Asia stocks tumble as KOSPI extends losses; AI shares drag regional markets

Asian stocks continued their decline on Monday, with South Korea's KOSPI shedding more than 5% amid intense selling in artificial intelligence-related technology shares. The market turmoil overshadowed easing Middle East tensions, falling oil prices, and an uptick in U.S. equity futures. President Donald Trump announced a new round of negotiations concerning the Strait of Hormuz, sparking optimism over a potential diplomatic resolution with Iran and easing worries about energy supply disruptions.

Despite the overall bearish trend, Wall Street's performance provided a small boost, with the Nasdaq 100 Futures up 0.9% and the S&P 500 Futures rising by 0.6% during Asian trading hours. Japan and China also suffered, with the Nikkei 225 falling 1% and the broader TOPIX losing 1.2%. Major Japanese tech companies like Sony Group, Murata Manufacturing, and Renesas Electronics also declined, while Chinese markets demonstrated relative resilience, with the Shanghai Shenzhen CSI 300 and Shanghai Composite falling only 0.6% and 0.5%, respectively.

Singapore's STI index experienced a minor dip of 0.5%, while Hong Kong's Hang Seng index edged up by 0.1%, buoyed by a more than 5% surge in Alibaba's shares following the unveiling of a new flagship AI model, and Tencent gaining over 2%. The retreat in oil prices further pressured energy stocks as President Trump's announcement of upcoming talks with Iran brought hope for de-escalation.

Energy-focused companies, including Australia's Woodside Energy, Santos, and INPEX Corp, all experienced declines, following the broader retreat in oil prices. Conversely, Australia's S&P/ASX 200 outperformed regional peers, advancing about 0.5% as financials and industrials offset energy sector weakness. The Reserve Bank of India is set to meet later in the week, with DBS economists anticipating the central bank to maintain interest rates steady while maintaining a balanced stance.

The RBI's decision is expected to be influenced by declining food inflation, allowing policymakers to adopt a wait-and-see approach. Markets are also expected to closely monitor China's July trade data, South Korea's inflation report, and Friday's U.S. nonfarm payrolls report.