(Bloomberg) -- Asian technology stocks fell for a second day on concerns over risks of tighter US curbs on semiconductor sales to China.
Shares of Japanese chip-equipment maker Tokyo Electron Ltd. slid as much as 11%, and were on course for their worst two-day loss since 2015. Korean memory maker Samsung Electronics Co.’s shares dipped as much as 3.3%, while leading foundry Taiwan Semiconductor Manufacturing Co.’s closed 2.4% lower Thursday.
The declines mirrored losses in global peers overnight after news that the Biden administration has told allies it’s considering more severe trade restrictions if companies such as Tokyo Electron and Netherlands-based ASML Holding NV continue giving China access to advanced chip technology.
The losses also follow recent underperformance by global tech stocks amid signs of a rotation away from what have been the market’s biggest drivers over the past year. The Bloomberg Asia Pacific Semiconductors Index is still up more than 30% this year even with a drop of about 5% this week.
“The broad share price impact suggests that this is more to do with market sentiment rather than real fundamental concerns,” and incremental tightening should not have a material impact given that trade restrictions have been an ongoing issue, said Billy Leung, an investment strategist at Global X Management Co. “This could be opportunistic for investors to take profit on a sector that has hugely outperformed,” he said.
Still, the news of potentially stricter curbs comes amid heightening geopolitical concerns. Donald Trump’s recent comments to Bloomberg Businessweek questioning whether the US has a duty to defend Taiwan have added to pressure on TSMC.
Separately, TSMC reported better-than-expected profit for the latest quarter after Thursday’s market close. In its results briefing, the key Nvidia Corp. supplier is likely to include discussion of its “strategy for geopolitical risk mitigation,” Charlie Chan, an analyst at Morgan Stanley, wrote in a note earlier.
Fellow Nvidia supplier ASML saw its shares tumble 11% in Amsterdam on Wednesday, even after it reported strong orders. The Philadelphia Stock Exchange Semiconductor Index slid nearly 7%, the most since March 2020.
ASML and Tokyo Electron are bearing the brunt of the declines on news that the US is considering imposing the so-called foreign direct product rule (FDPR), which allows for controls on foreign-made products that use any amount of American technology. That comes amid urging from rival US chip-equipment makers who feel that curbs on exports to China have unfairly hurt them.
Meanwhile, data released Thursday show that Japanese exports of semiconductor production equipment (SPE) to China surged 84% in the first half of 2024 compared with a year ago. The yen was about 11% lower at the end of the first half of this year compared with same time last year, which likely helped boost the value of exports.
“We have been waiting for tougher SPE export restrictions on China for a while” given the Asian nation’s technology ramp-up, said Amir Anvarzadeh, a strategist at Asymmetric Advisors Pte. “What was a surprise is that the US looks to resort to the FDPR to get allies to comply, as the Dutch and Japanese governments are clearly not listening, and the likes of Applied Materials Inc. and Lam Research Corp. had been complaining that they are losing share.”
--With assistance from James Mayger and Brett Miller.
©2024 Bloomberg L.P.
