KOSPI led losses, dropping almost 2%, while Nikkei 225 declined nearly 0.8%

Asian stocks traded mixed on Monday as investors gauge geopolitical tensions in the Middle East and new trade frictions after China tightened export controls on 20 Japanese entities.

Technology stocks remained on the backfoot after suffering major losses last week, as concerns over higher interest rates sparked profit-taking in the sector.

Trade tensions remained in focus after China placed 20 Japanese entities on its export control list for dual-use items, meaning Chinese companies must seek official approval before exporting to them. Beijing said the decision reflected concerns over Tokyo’s military ambitions.

Technology shares remained under pressure after last week’s sharp swings across semiconductor stocks worldwide highlighted growing investor unease over elevated valuations.

KOSPI led losses, dropping almost 2%, while Nikkei 225 declined nearly 0.8%.

S&P/ASX 200 edged 0.2% higher, Hang Seng rose nearly 1.6%, and Shanghai Shenzhen CSI 300 was little changed.

The cautious mood follows a volatile week for world markets, with investors increasingly questioning whether surging AI-related capital spending and semiconductor valuations can continue to justify their rapid gains after this year’s rally.

Despite upbeat earnings guidance from Micron last week, analysts said investors are becoming more selective within the AI trade, rotating away from some of the market’s biggest winners amid concerns over when massive AI investments will translate into stronger earnings growth. Month-end and quarter-end portfolio rebalancing also appeared to weigh on the sector.

The KOSPI, home to heavyweight chipmakers Samsung Electronics Co Ltd and SK Hynix Inc, has been particularly sensitive to the shift in sentiment after posting one of the strongest rallies among international equity markets this year. The chipmakers shed 5.3% and 3.6%, respectively, on Monday.

Gift Nifty 50 Futures were little changed, pointing to a muted open for Indian equities.

Attention now turns to a busy economic calendar this week.

Japan reported retail sales increased 5.3% year-on-year in May, comfortably beating expectations for a 3.1% rise, while large-scale retail sales also exceeded forecasts, suggesting domestic consumption remained resilient.

Later in the session India is scheduled to release industrial production and manufacturing output figures.