Key points
- Asian markets retreat after technology-led bearish rally
- South Korean and Japanese chip stocks lead losses
ISLAMABAD: Asian stocks fell on Thursday as technology shares came under renewed selling pressure, interrupting a four-day rebound.
Investors were wary of revived concerns about stretched valuations and the profitability of heavy investment in artificial intelligence (AI).
The MSCI Asia-Pacific index excluding Japan fell 0.69 per cent, led by technology stocks.
South Korea’s KOSPI dropped 3.64 per cent, and Japan’s Nikkei 225 declined 1.57 per cent, according to market data.
The retreat followed a weaker session on Wall Street, where the Nasdaq ended a winning streak as investors reacted to disappointing earnings and renewed doubts over the returns from massive AI-related spending.
Technology shares bore the brunt of the selling in Asia.
In Seoul, Samsung Electronics fell 2.44 per cent, and SK Hynix lost 6.95 per cent.
In Tokyo, memory-chip maker Kioxia plunged 9.61 per cent, and Tokyo Electron dropped 4.61 per cent.
The latest decline follows a sharp recovery in Asian technology stocks following a month-long sell-off.
ALSO READ: Stock Markets Stall, Oil Prices Fall on Hopes of US-Iran Hormuz Deal
South Korea had been among the hardest-hit markets during the earlier rout, but the KOSPI surged sharply at the end of last week as investors returned to beaten-down technology shares.
The renewed pressure suggests that investors remain cautious about whether the enormous capital spending in AI projects can generate sufficient profits to justify elevated technology valuations.
US tech stocks trigger decline
The immediate trigger came from Wall Street, where shares of SpaceX and Advanced Micro Devices (AMD) weakened following their quarterly results.
Although AMD’s earnings exceeded analysts’ estimates, the performance did not satisfy investors’ high expectations.
Concerns about the sustainability of AI investment have become a major factor influencing global equity markets.
Asian markets are particularly sensitive to changes in technology sentiment because companies in China, South Korea, and Japan play critical roles in the global semiconductor and electronics supply chain.
Developments in the Middle East also affected the overall market sentiment.
Oil prices remained relatively stable after hopes of a potential agreement between Iran and the United States helped ease fears of a prolonged disruption to energy supplies through the Strait of Hormuz.
Brent crude was trading around $79.31 per barrel, down 0.18 per cent, while US West Texas Intermediate (WTI) crude was at $74.96, down 0.35 per cent, according to Reuters.
Iranian officials have indicated progress towards arrangements with Oman concerning shipping through the Strait of Hormuz.
However, the reopening of the strategically important waterway remains dependent on US-Iran negotiations. The evolving situation left investors cautious about assuming that tensions have been permanently resolved.
Oil prices had fallen earlier in the week on expectations that a US-Iran agreement could reduce geopolitical risks and inflationary pressure.
Lower energy prices can also reduce pressure on central banks to keep interest rates high, potentially supporting equity markets.
Investors are now turning their attention to US employment data due on Friday.
The report is being closely watched for indications of the strength of the world’s largest economy and the likely direction of US monetary policy.
Private-sector US employers added only 44,000 jobs in July, down sharply from 95,000 in June and below economists’ expectations.
The weakness has increased attention on whether the US labour market is losing momentum.
Markets are also monitoring expectations for the Federal Reserve’s next interest-rate decision.
The combination of technology-sector volatility, uncertain US economic prospects and geopolitical developments is keeping investors cautious.
For Asian markets, the latest decline also highlights the continuing vulnerability of heavily technology-weighted indexes to shifts in expectations from AI investment and semiconductor demand.
The next US jobs report and developments in US-Iran negotiations are therefore likely to remain key drivers of global market sentiment in the near term.
