Asia's Winners and Losers as Stocks Sell Off Selectively on Iran War

Asian markets are selling off in response to the conflict in the Middle East, but not uniformly. Resource-rich countries are less-affected, while oil importers such as Japan and South Korea are experiencing a sharp correction.

Tuesday’s largest losers are this year’s biggest gainers, South Korean stocks, where the Kospi sank 7.2% as trading resumed following the Independence Movement Day holiday on Monday. The index remains 37.4% to the good for the year so far.

In Tokyo, the broad-market Topix ended Tuesday down 3.2%, with a similar 3.1% fall in the exporter-heavy Nikkei 225. Japan imports all its oil, and is only generating 9% of its electricity from nuclear power.

Patterns to Detect

What patterns can we detect from Asian trade? International exporters such as automakers, heavy industries that rely on petrochemical raw materials, transport stocks such as airlines

Australian stocks are insulated by the country’s natural blessings. A major source of coal for Asian industry, Australia saw its ASX/200 benchmark fall only 1.3% Tuesday.

The top two gainers in Australia were both coal companies. Thermal-coal miner New Hope Corp. NHPEF (ASX:NHC) shot up 7.4% Tuesday in Aussie trade, while Yancoal Australia YACAF (ASX:YAL) ended the day up 4.9%.

Dual-listed Canadian uranium miner NexGen Energy  (NXE)  (ASX:NXG) was up as much as 3.5% during the day but ended Sydney trade on a gain of 1.7%.

Broad Selling in Asia’s Top Performer

Tuesday’s selling was pretty uniform in Seoul, across heavy industry, carmakers, chipmakers, chemicals companies and utilities. State-backed utility Korea Electric Power (KEPCO), which generates some 96% of the country’s electricity, saw its shares KEP (KR:015760) fall 13.0% after an operating-profit miss, but there’s also concern about input costs, with South Korea importing almost all its oil, 70% of that from the Middle East.

There were also notable declines for major exporters such as petrochemicals supplier LG Chem (KR:051910), down 13.5%, consumer tech stablemate LG Electronics (KR:066570), down 12.4%, carmaker Hyundai Motor HYMTF (KR:005380), down 11.7%, and chipmakers SK Hynix HXSCL (KR:000660), down 11.5%, and Samsung Electronics (KR:005930), down 9.9%.

Like Korea, Japan imports all its oil, and is particularly vulnerable to an energy shock. The country shuttered all its nuclear reactors following the disaster at the 2011 Fukushima Daiichi nuclear plant, and has only restored operations at 15 out of its 32 nuclear reactors. So it has a relative overreliance on coal and natural gas.

Operator Tokyo Electric Power (TEPCO) restarted Unit 6 at the country’s largest nuclear power station last month, but suspended operations a day later due to a malfunction. For now, Japan relies on fossil sources for much of its power, although Japan’s long-term energy plan calls for 30 reactors to generate 20% of the country’s power by 2040. TEPCO shares TKECY (T:9501) fell 4.6% Tuesday.

Drugmakers Down in Tokyo

The largest losers on Tuesday in Japan are drugmaker Sumitomo Pharma SMDPY (T:4506), down 19.1% as the company announced a dilutive issuance of up to 60 million shares, and electronic-component maker TDK TTDKY (T:6762), down 10.4% thanks to its reliance on imports of resins, magnetic materials and energy.

Mazda Motor MZDAY (T:5714) was the Nikkei’s third-largest decliner, down 9.3%, with the automaker getting around 30% of total sales from exports, one of the highest export ratios among Japanese carmakers. Rivals Nissan Motor NSANY (T:7201) and truck and diesel engine maker Hino Motors HINOY (T:7205), both down 7.5%, and motorbike and small-car maker Suzuki Motor SZKMY (T:7269), down 7.2%, also witnessed large declines. 

Carmakers with large U.S. factories such as Toyota Motor  (TM)  (T:7203), down 6.1%, and Honda Motor  (HMC)  (T:7267), down 4.0%, were protected by their U.S. sales and the renewed strength of the U.S. dollar, up 3.4% against the Japanese yen since mid-February.

Only six of the 225 stocks in the Nikkei rose on Tuesday, led by Japan’s largest gas utility, Tokyo Gas TKGSY (T:9531), up 2.2% rise and second-city rival Osaka Gas OSGSY (T:9532), up 2.1%.

Natural-resources producers also led the way in Hong Kong, where the benchmark Hang Seng fell a modest 1.1%.

Gas-pipeline operator ENN Energy Holdings XNGSY (HK:2688) leads Tuesday’s gains, up 5.1%, with China’s state-backed oil producers PetroChina (HK:0857), up 5.0%, and CNOOC (HK:0883), up 3.2%, the other major advancers.

Defensive Plays Up in Hong Kong

But we also saw a solid performance for defensive stocks such as China Construction Bank CICHY (HK:0939), up 2.2%, rival ICBC IDCBY (HK:1398), up 1.6%, and the defensive local shopping-center operator Link REIT LKREF (HK:0823), up 1.5%.

The losses in Hong Kong are again led by exporters, speculative stocks and manufacturers. Xinyi Solar XISHY (HK:0968) fell 6.3% after reporting on Friday that 2025 sales fell 4.8%. But the stock is further hampered by the solar-panel maker’s reliance on petrochemicals and fossil fuels.

Gold miner Zijin Mining ZIJMY (HK:2899) fell 6.1%, similar to the 5.1% decline we’re seeing in the SPDR Gold Trust  (GLD)  on Wall Street. Jewelry chain Chow Tai Fook CJEWY (HK:1929) dipped 4.8% thanks to its emphasis on gold jewelry.

As in Japan and South Korea, pharmaceutical stocks fell in Hong Kong, with contract drug developer WuXi Biologics WXXWY (HK:2269) down 4.5%, online drugstore and clinic Ali Health (HK:0241) off 3.9% and drugmaker CSPC Pharmaceutical CHPTY (HK:1093) down 3.8%.

Labubu doll maker Pop Mart  (PMRTY)  (HK:9992) fell 5.5%, investors opting to take money off the table with a stock that quadrupled from January through August last year. It looks like Labubu mania is waning, so I would expect the stock to fall further, undoing the rally surrounding the February 6 announcement that the company sold 100 million Labubu dolls last year.

While there’s broad-based selling in Asia, little of the impetus is coming from within the region. We can expect continued selling among companies that rely on petrochemicals, but energy extractors and banks are acting as defensive shields for Asian exposure.

We can expect magnified moves in any Asian markets that are closed on days of large Wall Street moves. Markets are closed Tuesday in India for the National Day holiday, and in Thailand for Makha Bucha day, a day of reflection on Buddha’s teachings.

At the time of publication, McMillan had no positions in any securities mentioned.