South Korean stocks opened higher on Monday but pared gains, with semiconductor stocks drawing market attention. Meanwhile, oil prices extended their rally after Iran and the United States hit a deadlock in negotiations over reopening the Strait of Hormuz.
The MSCI Asia Pacific Index rose 0.8%, following last Friday's gains on Wall Street. SK Hynix's announcement of a capital expenditure plan exceeding 54 trillion won boosted the KOSPI, which briefly surged over 2% during the session before pulling back. The KOSDAQ triggered its SIDECAR mechanism, temporarily halting program buying. At the same time, Brent crude oil gained more than 1% to trade above $84, after surging over 5% in the previous three trading sessions.
According to CCTV News on August 11, U.S. President Donald Trump said in an interview on the 9th that he is currently "downplaying" the Iran issue. Meanwhile, Xinhua News Agency reported on the same day that Iranian Foreign Minister Abbas Araghchi explicitly denied any direct negotiations between the two sides, stating, "There are no negotiations between Iran and the U.S. at the moment," and that "information exchange is conducted through intermediaries." Additionally, U.S. July consumer price data will be released this week, with markets closely watching its impact on the Federal Reserve's interest rate path.
South Korean shares open higher, KOSDAQ circuit breaker triggered
The KOSPI opened up 0.8% at 6,306.33 points, briefly surging over 2% during the session before narrowing its gain to around 0.75%. After falling 0.6% in the previous session, Monday's rebound was primarily driven by the chipmaking sector.
SK Hynix jumped 1.5% after the company announced a total investment plan of approximately 54 trillion won, with 35.2 trillion won allocated for the Yongin "Y2" wafer fab and 19.1 trillion won for the Cheongju "M17" wafer fab, to meet the growing demand for memory in the AI era. Samsung Electronics rose about 2.3%.
The Korea Exchange triggered the KOSDAQ SIDECAR mechanism on Monday, halting program buying on the junior board. Japan's market also strengthened, with the Nikkei 225 rising about 2% by the early close and the Topix gaining 0.8%, led by semiconductor-related stocks like Advantest and Tokyo Electron.
These gains followed last Friday's rally on Wall Street. The unexpectedly weak U.S. July nonfarm payrolls data drove the S&P 500 to a record high, as markets interpreted the soft jobs data as a signal that the Federal Reserve would not need to raise interest rates immediately.
Hormuz negotiations hit deadlock, oil prices extend rally
Brent crude oil futures rose more than 1% on Monday, trading at $84.16 per barrel, while WTI crude gained about 0.84% to $78.64 per barrel. Over the previous three sessions, Brent had already accumulated a gain of over 5%.
Weekend talks between Iran and Oman failed to reach an agreement on reopening the Strait of Hormuz. Iranian Foreign Minister Abbas Araghchi made it clear that Tehran is not engaged in direct negotiations with the United States. According to media reports, Mohammad Bagher Zolghadr, head of Iran's Supreme National Security Council, stated that the Strait of Hormuz will remain closed until the U.S. meets six conditions, including ending acts of war and aggression against Iran and its allies and providing compensation to Iran.
The U.S. side insists that any reopening arrangement must guarantee unrestricted freedom of navigation, without any approval, fee, or control conditions imposed by Iran. According to Citigroup, Yemen's Houthi group continues to attack ships near the Red Sea and the Bab el-Mandeb Strait related to Saudi Arabia, keeping risks high beyond the Strait of Hormuz.
Westpac noted in a report, "Entering the sixth month of the Iran war, uncertainty remains elevated. The Strait of Hormuz is effectively still closed, and the involvement of Yemen's Houthis further disrupts alternative Red Sea shipping routes."
Trump's tone becomes more restrained, market sentiment relatively stable
According to media reports, Trump said in an interview on Sunday that the U.S. can wait for Tehran to soften its stance due to economic pressure, rather than resorting to military escalation. In recent weeks, Trump had repeatedly threatened massive airstrikes on Iran but later backed down, citing a desire to leave room for negotiations.
My Bui, an economist at AMP Ltd., wrote in a client note that given Trump's approval ratings have hit new lows, investors should not be overly bearish, as he is likely to back down from threats again. "For now, markets remain normal, with equities supported by solid fundamentals, strong economic growth, and productivity gains."
Bloomberg strategist Mark Cranfield noted that oil prices strengthened on Monday, but traders are skeptical about whether the rally can be sustained. "Net long oil positions saw only a modest rebound in July and have already been reduced across various crude contracts."
In other markets, U.S. Treasuries slightly gave back some of last Friday's gains on Monday, with the 10-year yield rising 1 basis point to 4.66% and the 2-year yield rising 2 basis points to 4.21%. Gold fell about 0.5% to around $4,320 per ounce, following a gain of over 7% last week, its largest weekly gain since January.
Updates to follow
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