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Asian stocks sink on tech losses as rates, inflation fears mount

Published 05/29/2024, 11:04 PM
© Reuters.

Investing.com-- Most Asian stocks fell on Thursday amid persistent fears of sticky inflation inviting high interest rates, with the technology sector seeing the steepest declines as investors also locked-in recent profits. 

Regional markets took a weak lead-in from Wall Street, which fell on Wednesday tracking tech losses and some weak earnings, and as fears of high interest rates remained in play before key economic readings this week.

U.S. stock index futures saw extended losses in Asian trade, with focus squarely on upcoming gross domestic product data and PCE price index data- the Federal Reserve’s preferred inflation gauge- due on Thursday and Friday, respectively. 

Tech, chipmaking stocks lead losses as AI rally cools 

Tech-heavy indexes were the worst performers in Asian trade, with Japan’s Nikkei 225, Hong Kong’s Hang Seng and South Korea’s KOSPI down between 1% and 1.5%.

An initial rally in the sector, driven by hype over artificial intelligence, now appeared to be winding down, while decreased risk appetite also saw investors lock-in recent gains in the sector. 

Major chipmaking stocks- which had the highest amount of exposure to the recent AI rally- were the biggest decliners. Japan’s Advantest Corp. (TYO:6857) slid 5.5% and was the worst performer on the Nikkei, while memory chip-making major SK Hynix Inc (KS:000660) fell 2% in South Korean trade. 

TSMC (TW:2330) (NYSE:TSM)- the world’s biggest contract chipmaker- sank 1.3% in Taiwan trade.

A key outlier in the sector was Semiconductor Manufacturing International Corp (HK:0981)- the biggest chipmaker in China. The stock jumped nearly 4% after recent data showed it had become the third-largest chipmaker in the world by foundry capacity. 

The stock is also set to benefit from more supportive measures from Beijing, after the government recently unveiled a new $45 billion fund to support local chipmaking efforts.

Chinese losses limited by promises of more policy support

Chinese stocks fell relatively less than their regional peers, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes losing about 0.2% each.

Sentiment towards the country was somewhat supported by the People’s Bank promising more measures to foster economic growth. The promises come after Beijing rolled out a string of policy and funding measures over the past month, to shore up economic growth. These measures also sparked a stellar rally in Chinese markets, although it appeared to be slowing down in recent sessions.

Focus this week is also key Chinese purchasing managers index data, which is due on Friday.

Broader Asian markets retreated as sentiment soured in anticipation of more cues on U.S. interest rates. Australia’s ASX 200 slid 0.6%, extending losses after a hotter-than-expected inflation reading on Wednesday.

Futures for India’s NSEI index pointed to a negative open, with the index set for more losses as it retreated from record highs. 

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