Asian Markets Plunge Sharply as Tech Sell-Off and Global Pressures Mount

Asian stock markets experienced significant declines on Friday morning, with Japan's Nikkei index dropping 5.6% in Tokyo and South Korea's Kospi index falling 6.4% in Seoul. Hong Kong's Hang Seng lost 2%, while Shanghai's market declined by 1.6%. The sharp downturn marks a reversal from the strong momentum that had driven technology stocks in South Korea and across Asia to new highs earlier in 2026.

According to the research department of the stock exchange, investors are aggressively taking profits and moving funds out of the technology sector. Foreign institutional investors quietly withdrew over $100 billion worth of South Korean shares, leaving local retail investors, often using leveraged money, to dominate the market. Many retail investors had increased exposure through leveraged exchange-traded funds (ETFs) designed to double daily returns on individual stocks like SK Hynix. These ETFs are now exacerbating the downward spiral by automatically selling shares to maintain their leverage ratios as prices fall.

In response to the extreme price volatility, South Korean financial regulators intervened by freezing new issuances of leveraged ETFs on single stocks and tightening trading regulations to curb market instability. The situation is further complicated by escalating global macroeconomic pressures, including renewed geopolitical tensions that have pushed oil prices higher and strengthened the US dollar. These factors have revived fears of global interest rate hikes, making Asia's sensitive technology markets particularly vulnerable.

Meanwhile, US markets closed lower on Thursday, with the Dow Jones down 0.2%, the S&P 500 down 0.5%, and the Nasdaq falling 1.5%. After the close, Netflix reported second-quarter earnings with adjusted net income of 80 cents per share, slightly above analyst expectations of 79 cents. Revenues rose 13% year-over-year to $12.56 billion, just below the forecast of $12.59 billion. However, Netflix lowered its 2026 revenue guidance range to $51-51.4 billion from a previous $50.7-51.7 billion, causing its stock to drop 6% in after-hours trading.