July 12 2024: Most Asian stocks retreated on Friday, with technology-heavy indexes experiencing significant losses due to profit-taking, despite optimism over potential U.S. interest rate cuts fueled by soft inflation data.
Regional stocks mirrored overnight declines on Wall Street, where heavy losses in technology stocks, especially chipmakers and those tied to artificial intelligence, led the NASDAQ Composite to fall nearly 2%.
U.S. stock futures remained steady in Asian trade, with attention shifting to the start of the second-quarter earnings season. Several major banks are scheduled to report on Friday.
Losses in stock markets followed softer-than-expected U.S. consumer price index data for June, which increased speculation that the Federal Reserve might begin cutting interest rates in September.
Asian Tech Slammed by Profit-Taking, Nikkei Slides 2%
Tech-heavy indexes in Asia, which had previously outperformed their regional counterparts, saw the heaviest losses on Friday. The sector faced significant profit-taking after enthusiasm over AI led to substantial valuation increases earlier this year.
Investors were seen pivoting to other economically-sensitive sectors anticipated to benefit from lower interest rates.
Japan’s Nikkei 225 exemplified this trend, dropping 2.2% from record highs reached on Thursday. The broader TOPIX, which is less tech-centric than the Nikkei, fell 0.9%. Chipmakers such as Renesas Electronics Corp (TYO:6723), Advantest Corp. (TYO:6857), and Tokyo Electron Ltd. (TYO:8035) declined between 4% to 7%, while tech investment firm SoftBank Group Corp. (TYO:9984) decreased by 3.2%. South Korea’s KOSPI fell 1.4%, with major memory chipmaker SK Hynix Inc (KS:000660) dropping over 3%.
TSMC (TW:2330) (NYSE
), the world’s largest contract chipmaker and a significant driver of the recent tech rally, fell more than 4% from record highs.
Hong Kong Outperforms on Bargain Buying, ASX Hits Record High
However, major Chinese technology stocks largely avoided the weakness seen in their global counterparts, as their relatively lower valuations attracted bargain hunters.
Hong Kong-listed Chinese tech giants such as Baidu (NASDAQ
) Inc (HK:9888), Alibaba Group Holding Ltd (HK:9988), and Tencent Holdings Ltd (HK:0700) each rose over 2%, helping the Hang Seng index rally by 2%. The index moved further away from a two-month low hit earlier this week.
Chinese markets experienced less decline compared to their broader peers, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes remaining steady on Friday.
Australia’s ASX 200 outperformed its Asian counterparts, rising 0.9% to a record high of 7,969.10 points. The index, with a relatively small proportion of technology stocks, benefited from flows into economically sensitive sectors such as mining and industrials.
These sectors advanced across Asia, expected to benefit from a low-interest-rate environment.
Futures for India’s Nifty 50 index suggested a flat opening, with gains in industrial and consumer stocks likely to offset losses in tech. The Nifty and the BSE Sensex 30 had both reached record highs earlier this week amid sustained optimism over the Indian economy.
