(Bloomberg) -- Asian stocks tumbled as sentiment was hit by a triple whammy of a selloff in Japanese equities, a global tech rout and signs of weakness in the US economy.
The MSCI Asia Pacific Index plunged as much as 3.6%, the most since February 2021, with Taiwan Semiconductor Manufacturing Co., Mitsubishi UFJ Financial Group and Samsung Electronics Co. among the biggest drags. Japan’s Topix Index entered a technical correction in its worst two-day rout since 2011, while benchmarks in the tech-heavy markets of South Korea and Taiwan fell about 4%.
Traders took risk off the table amid signs the investment landscape is shifting. Japanese stocks are falling out of favor as the prospect of further interest-rate hikes by the country’s central bank supports the yen, hitting exporters’ shares. Meanwhile, disappointing earnings from US tech behemoths has cooled optimism over artificial intelligence, triggering a rout that has ensnared Asian chip giants.
“The recent strengthening of the Japanese yen coupled with tech sector weakness is poised to significantly impact the Asian stock market,” said Manish Bhargava, a fund manager at Straits Investment Holdings in Singapore. “Given the substantial weight of tech stocks in Asian indices, disappointing results from tech giants could trigger a broader market downturn in Asian markets.”
MSCI’s Asia benchmark is on track for its third-straight week of declines. Regional losses also came after concerns over the health of the US economy emerged, raising doubts over whether the Federal Reserve will be able to engineer a soft-landing. Investors will be monitoring payrolls data due later Friday for further clues on the state of the economy and the Fed’s rate path.
“The narrative is changing quickly after a confirmation of the FOMC’s September rate cut path. As manufacturing and jobs data are pointing toward recession levels, investors are now questioning whether the Fed is cutting too late,” said Billy Leung, an investment strategist at Global X Management. “A US recession would also hurt Asia.”
The decline in Korea’s Kospi Index — the biggest in four years — puts the gauge at less than 1% away from erasing year-to-date gains. Taiwan also saw a record amount of foreign selling amid the global tech selloff.
Sectors to Watch
- Shares of Apple Asia suppliers fall as the iPhone maker’s sluggish China revenue marred its strong performance last quarter.
- ImmuneOnco leads gains in Chinese biotech stocks after the company entered a license and collaboration agreement for its antibody drug with US-based Instil Bio.
- Macau casino stocks drop in Hong Kong after gaming revenues missed analyst estimates again in July over crackdown fears.
- A change is afoot in Asian chip stock leadership, as buying by foreign investors drives gains in shares of Samsung Electronics Co. amid a search for the next top performers in the artificial intelligence trade.
- Paladin Energy and other Australian uranium mining stocks follow their overseas peers lower after the world’s top producer of the nuclear reactor fuel increased its full-year production guidance.
Markets at a Glance
- MSCI Asia Pacific Index fell 3.4%
- Japan’s Topix Index fell 6.1%; Japan’s Nikkei Index fell 5.8%
- China’s CSI 300 Index fell 1%; Hong Kong’s Hang Seng Index fell 2.1%; Hong Kong’s Hang Seng China Enterprises Index fell 1.8%
- Taiwan’s Taiex Index fell 4.4%
- South Korea’s Kospi Index fell 3.7%; South Korea’s Kospi 200 Index fell 4%
- Australia’s S&P/ASX 200 Index fell 2.1%; New Zealand’s S&P/NZX 50 Gross Index fell 0.3%
- India’s NSE Nifty 50 Index fell 1.1%
- Singapore’s Straits Times Index fell 1.1%; Malaysia’s KLCI Index fell 0.8%; Philippines’s PSEi Index fell 1.3%; Indonesia’s JCI Index fell 0.2%; Thailand’s SET Index fell 0.7%; Vietnam’s VN Index rose 0.8%
- 10-year Treasury yield fell 2.3 basis points
- Cboe Volatility Index rose 1.65 points
- Bloomberg Dollar Index fell 0.1%
- West Texas Intermediate crude rose 0.7% to $77 a barrel
- Euro rose 0.2%
Here Are the Most Notable Movers
- Zomato’s shares rally to a record in India after the delivery firm’s quarterly profit beat the average analyst estimate, driven by higher-than-expected margins in its food business.
- Engineering solutions provider Seatrium’s shares drop 11% after it booked S$69.9 million ($52.3 million) provision for onerous contracts in the first half of the year.
- Brilliance China’s shares rise 1.7% in Hong Kong after Citigroup raised its price target and opened a 30-day positive catalyst watch citing a potential upbeat dividend surprise.
- Toyota Motor shares drop for a second day after the carmaker posted its quarterly results on Thursday.
Notes From the Sell-Side
- Bank of America strategist Michael Hartnett says investors should sell stocks on the first Fed rate cut due to increasing probability of a more severe US recession.
- The recent choppiness in stock markets is likely to persist against a backdrop of high macro and geopolitical uncertainty as well as weak seasonality, according to Barclays strategists.
- The bulk of earnings growth is coming from defensive companies, likely offering further support to the group whose sectors have been the best performer in the last three months in the US, according to JPMorgan strategists.
- Investors hoping for a quiet summer are being sorely disappointed as turbulence pummels the stock market, spurring outsized swings in US equity indexes with the dog days of August now upon us.
Related Market News
- Taking Stock: India’s stocks are likely to extend their record rally as investors bet on strong earnings growth and foreign inflows expand.
- Inside Asia: Most Asian currencies gain against the dollar, spurred by rising dovish bets for the Federal Reserve, as investors eye US nonfarm payrolls. Ringgit outperformed.
- Global Wrap: A selloff in stocks intensified on Friday as concerns deepened over the health of the US economy and the outlook for technology companies.
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Abhishek Vishnoi.
©2024 Bloomberg L.P.