(Sharecast News) - Asia-Pacific markets fell on Monday, with losses led by South Korea as investors weighed fresh data on China's factory activity and continued to monitor precious metals after sharp declines late last week.
Risk sentiment was also pressured by a steep sell-off in Korean futures, while oil prices slid sharply.
As Patrick Munnelly, market strategy partner at TickMill, noted, "the dramatic market turnaround on Friday shook assets that had been thriving in January, leading to a sharp sell-off," underscoring a broader reassessment of risk after a period of strong gains.
Tokyo led lower by tech, materials plays
In Japan, equities retreated, with the Nikkei 225 falling 1.25% to 52,655.18 and the Topix down 0.85% to 3,536.13.
Losses were led by technology and materials stocks, with Lasertec sliding 13.96%, Sumitomo Metal Mining dropping 11.42% and fashion retailer ZOZO falling 9.21%.
The pullback came amid renewed volatility across global equities, with Munnelly highlighting that "these market jitters highlight growing volatility after a period of strong gains in precious metals and record-breaking highs in stocks, largely driven by massive investments in artificial intelligence."
Broad declines in China amid diverging manufacturing surveys
Chinese markets posted broad declines as investors digested mixed signals from manufacturing data.
The Shanghai Composite fell 2.48% to 4,015.75, while the Shenzhen Component dropped 2.69% to 13,824.35.
Among individual stocks, Beijing Piesat Information Technology plunged 20.01%, Liuzhou Iron & Steel lost 10.07% and Henan Dayou Energy slid 10.04%.
A private survey showed China's factory activity expanded modestly in January, with the seasonally adjusted RatingDog China general manufacturing PMI, compiled by S&P Global, rising to 50.3 from 50.1 in December, in line with expectations and marking the strongest reading since October.
Production and new orders improved, including a rebound in export demand, but business confidence slipped to a nine-month low amid rising costs, particularly for metals.
The private survey contrasted with an official reading from China's statistics authorities showing manufacturing activity unexpectedly contracted to 49.3, reflecting seasonal effects and softer global demand ahead of the extended Lunar New Year holiday.
Hong Kong equities also weakened, with the Hang Seng Index down 2.23% at 26,775.57.
BYD fell 6.91%, China Unicom Hong Kong declined 6.29% and Zijin Mining Group lost 5.58%, as sentiment toward Chinese and resource-linked stocks remained fragile.
The weakness echoed broader regional declines, with Munnelly pointing out that "the two-day slump in Asian markets marked the steepest decline since early April," while Asia's benchmark equity gauge dropped 2%.
Seoul sees sharpest losses despite improved manufacturing data
South Korea saw the sharpest losses in the region.
Kospi 200 futures fell as much as 5%, triggering a sidecar trading halt, while the Kospi 100 index slid 5.7% to 5,560.82.
Heavyweight stocks sold off sharply, with Korea Zinc down 12.42%, Hyosung Heavy Industries falling 12.37% and SK Square losing 11.4%.
The sell-off came amid heightened sensitivity around valuation concerns in AI-linked names, with Munnelly noting that "South Korea's Kospi, a major index for AI-related stocks, plunged 4%," as investors reassessed stretched valuations following January's rally.
The equity slump came despite signs of improving conditions in the manufacturing sector, with the S&P Global South Korea manufacturing PMI rising to 51.2 in January from 50.1, the highest level since August 2024.
New orders and exports strengthened, supporting modest production growth, although inflationary pressures linked to a weak currency and higher metals prices remained elevated.
Sydney slides, Wellington losses limited
Australian equities also moved lower, with the S&P/ASX 200 declining 1.02% to 8,778.60.
Losses were led by GrainCorp, which tumbled 14.03%, while Newmont Corporation fell 10% and Emerald Resources dropped 9.26%, tracking weakness in commodity prices.
Precious metals remained under heavy pressure after last week's sharp reversal, with Munnelly noting that "gold experienced a steep drop of 6.3%, briefly dipping below $4,600 on Monday," while "silver fared even worse, plummeting 12% following Friday's historic 26% nosedive."
New Zealand shares were little changed by comparison, with the S&P/NZX 50 edging down 0.08% to 13,412.44.
KMD Brands fell 3.64%, Vista Group International declined 3.23% and Serko lost 2.71%.
Dollar modestly firmer as oil prices weaken further
In currency markets, the dollar was modestly firmer, though broader gains remained limited amid political and policy uncertainty.
Munnelly said that "these uncertainties, combined with political disruptions, are unlikely to trigger a sustained dollar rally," adding that current expectations for US rate cuts "seem underpriced, posing continued pressure on the USD."
The greenback rose 0.02% on the yen to last trade at JPY 154.81, as it climbed 0.13% against the Aussie to AUD 1.4380 and gained 0.08% in the Kiwi to change hands at NZD 1.6620.
Oil prices extended losses, with Brent crude futures last down 4.73% on ICE at $66.04 per barrel, and the NYMEX quote for West Texas Intermediate falling 5.05% to $61.92, adding to pressure on energy and resource stocks across the region.
Reporting by Josh White for Sharecast.com.
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