Hong Kong (AFP) – Most Asian stocks sank on Thursday as tech firms came under renewed pressure from worries over the AI boom, with Seoul again taking the brunt of the selling. Regional investors were unable to build on a second day of gains on Wall Street, where more data showing inflation easing pushed back bets on a Federal Reserve interest rate hike to later in the year.
Seoul’s Kospi dived more than six percent as chip titan SK hynix shed more than 11 percent amid growing anxiety that the AI rally — which had pushed both firms to record highs this year — has run its course. Traders are questioning whether the vast sums pumped into the AI sector in recent years can vindicate the eye-watering valuations for some firms.
That comes after Dutch giant ASML, which makes cutting-edge machines to manufacture chips, reported a rise in second-quarter net profit and hiked its sales forecast for the full year. And on Thursday, TSMC announced net profit soared more than 77 percent to a record high in the second quarter thanks to massive demand for AI hardware. It said it would invest an additional $100 billion in the US state of Arizona.
While investors remain confident in the outlook for the AI sector, analysts said the trade had become too crowded. “The Philadelphia Semiconductor Index had risen roughly 83 percent this year, valuations had stretched,” wrote SPI Asset Management’s Stephen Innes. “Strong earnings and healthy demand can keep a trade alive, but they cannot prevent a correction when everyone already owns it.”
He added that investors were not “suddenly questioning whether AI infrastructure demand exists (but) questioning how much of that demand has already been paid for in the share price.” “The numbers can still be excellent and the stocks can still fall. Once expectations have been pushed into the rafters, even a good result can arrive looking short,” he said.
Elsewhere in Asia, Tokyo — also rich in tech firms — suffered heavy selling, while Shanghai, Singapore, and Wellington also dropped. Taipei and Sydney were marginally lower. Hong Kong was the outlier, climbing more than one percent as Chinese chip firms, which have been beaten down this year, enjoyed another advance. There were also gains in Manila, Mumbai, Bangkok, and Jakarta.
London, Frankfurt, and Paris all fell. The weak performances came even after all three main indexes in New York ended higher thanks to hefty gains in tech giants including Apple, Amazon, and Facebook parent Meta. That came as figures showed US producer prices slipped 0.3 percent on-month in June thanks to lower energy prices as the United States and Iran reached a truce to reopen the Strait of Hormuz and allow crude to pass through again. Data from Tuesday showed consumer prices rising less than expected.
The readings soothed market worries that the Fed would hike borrowing costs this month, though analysts warned that the renewed US-Iran hostilities, which have seen them trade strikes for around a week, could undo the good work. Crude prices were mixed, with traders remaining on edge as traffic through the strait — through which a fifth of world oil and LNG passes — thinned out.
On currency markets, the South Korean won strengthened slightly against the dollar after the country’s central bank hiked interest rates for the first time since 2023 as it tackles stubborn inflation and an economy buoyed by strong chip exports. And sterling extended gains after rising more than one percent against the greenback on Wednesday following reports that Britain’s Home Secretary Shabana Mahmood — considered relatively reassuring to markets — was a frontrunner to become the next finance minister.
– Key figures around 0810 GMT –
West Texas Intermediate: UP 0.1 percent at $79.70 a barrel
Brent North Sea Crude: DOWN 0.2 percent at $84.77 a barrel
Tokyo – Nikkei 225: DOWN 2.8 percent at 66,835.54 (close)
Seoul – Kospi: DOWN 6.4 percent at 6,820.60 (close)
Hong Kong – Hang Seng Index: UP 1.3 percent at 25,008.60 (close)
Shanghai – Composite: DOWN 1.9 percent at 3,882.41 (close)
London – FTSE 100: DOWN 0.5 percent at 10,463.34
Pound/dollar: UP at $1.3535 from $1.3530
Euro/pound: UP at 84.77 pence from 84.72 pence
Euro/dollar: UP at $1.1473 from $1.1463 on Wednesday
Dollar/yen: DOWN at 162.04 yen from 162.27 yen
© 2024 AFP
