Here’s why the Nikkei 225 and Kospi indices are slumping today

Asian stocks are in a strong freefall today, July 28, with most technology companies being in the red. The Nikkei 225 Index plunged to 62,385, down by 14.6% from its highest point this year. In South Korea, the Kospi Index moved deeper into the bear market after falling by over 35% from its peak. 

Nikkei 225 and Kospi Index plunged as tech stocks fell

A look at the top constituents shows that technology stocks are leading the ongoing sell-off. In Japan, Softbank stock dived by 5.16%, while Kioxia Holdings fell by 18%. Tokyo Electron plunged by over 10%, while Advantest dropped by 10.35%. Other top companies that have benefited from the AI boom, like Murata Manufacturing and Renesas Electronics, plunged by double digits.

The same trend is happening in South Korea, where Samsung Electronics, SK Hynix, and SK Square stocks plunged by 11.8%, 13.15%, and 14.4%, respectively. Samsung Electro-Mechanics, LG Energy, and SK Inc also continued their downward trend. All these technology companies have plunged by over 30% from their highest levels this year.

The same happened in the United States, where companies like Sandisk, ASML, Advanced Micro Devices (AMD), Lam Research, Micron, Western Digital, and Seagate Technology were among the top laggards on Monday. 

The ongoing memory stock crash is happening ahead of key earnings. Most of them will publish their earnings later this week. Samsung Electronics and SK Hynix will release their numbers on July 30 and July 29, respectively. 

In Japan, Tokyo Electron, Advantest, and Kioxia Holdings will also publish their numbers this week. Judging by the recent earnings by Micron, Alphabet, Tesla, and Samsung, analysts anticipate that these companies will publish strong numbers as the memory chip demand escalates.

The stocks will also react to the upcoming US big-tech earnings by companies like Microsoft, Meta Platforms, Apple, and Amazon. These companies will provide more information about their capital expenditure plans. 

In addition to Japan’s tech names, other companies in the Nikkei 225 Index like Hitachi, Komatsu, Mizuho Financial, Japan Tobacco, and Sumitomo Mitsui Financial will publish their numbers later this week.

Key events to watch this week

Looking ahead, the Kospi and Nikkei 225 indices will react to several important events. First, traders are watching the evolving situation in the Middle East, where the US and Iran have paused their attacks. 

In a statement, Trump said that the two sides were in talks and that he was optimistic about a deal. Without it, Trump warned that he will resume strikes against Iran. Still, Iran has denied reports of talks with the US.

At the same time, Iran has warned that it will respond to a recent attack against an Iranian ship by Ukraine. Such a move may expand the war between the two countries. Also, the conflict between Houthis and Saudi Arabia is continuing.

The Nikkei 225 and Kospi indices will also react to Wednesday’s Federal Reserve interest rate decision. Economists expect the bank to leave interest rates unchanged between 3.50% and 3.75%. 

However, some analysts predict that the bank will either hike rates or signal its intention to hike later this year. 

Finally, the Bank of Japan (BoJ) will deliver its interest rate decision on Friday this week. And with the Japanese yen trading at a multi-decade low, and inflation remaining high, there is a risk that the bank will surprise the market by hiking rates.

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