Stocks in Asia saw a downturn on Wednesday, reflecting a selloff in the US markets as investors pondered the sustainability of the artificial intelligence rally that has recently fueled a bull market. The MSCI Asia Pacific Index, an indicator of regional market trends, fell for the third consecutive session, with significant declines in stock markets across Sydney, Tokyo, and Seoul. In Greater China, stocks plummeted by as much as 1.3%, marking a steep drop of over 10% since reaching a peak on October 8.
A notable decline was observed in the semiconductor sector, with major Asian chip manufacturers such as SK Hynix and Samsung Electronics experiencing losses. This decline came in the wake of ASML Holding NV, a key player in the industry, lowering its growth forecast for 2025, which triggered a broader selloff in tech stocks. In the US, shares of Nvidia Corporation dropped 4.7%, indicating potential stagnation for some of the industry’s leading companies.
Vishnu Varathan, the Asia head of economics and strategy for Mizuho Bank in Singapore, noted that the recent pullback in European tech stocks is likely to impact Wall Street, consequently weighing on Asian markets. He pointed out that optimism about possible stimulus from China has faded, resulting in investors opting to take profits rather than adopt bullish positions on Chinese equities.
Interestingly, while the main benchmark in China saw a drop, a Bloomberg index tracking Chinese property stocks posted gains. This uptick comes as the market anticipates more measures to support the struggling real estate sector, which could be detailed in an upcoming press briefing. However, Kenny Wen, head of investment strategy at KGI Asia, cautioned that any immediate benefits for property stocks may only be transient unless substantial financial packages are introduced.
Since late September, volatility in Chinese stocks has surged, following a wave of stimulus from the central bank that initially sparked optimism but is now waning. Investors are increasingly curious to see if authorities will implement more aggressive measures to revitalize both the economy and the stock market.
Stateside, the S&P 500 index edged down to approximately 5,815, with the Nasdaq 100 declining by 1.4%. The US dollar held steady after briefly rising to a two-month peak as former President Donald Trump reiterated his proposals to significantly increase tariffs on imports. Meanwhile, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, indicated that although he expects a slowdown in the US economy, it should remain robust, further noting potential fluctuations in the downward trajectory of inflation.
In Asia, there was a notable decline in the New Zealand dollar and bond yields following a sharp drop in the annual inflation rate in the third quarter, which returned to the central bank’s target range for the first time in over three years. Several Southeast Asian economies, including Indonesia and Thailand, are set to unveil their monetary policy decisions, with expectations that rates will remain stable, while a cut is anticipated in the Philippines.
On the commodities front, oil prices rebounded after a substantial drop of more than 4% the previous day, with reports indicating Israel’s potential independent actions regarding Iran, which could affect energy infrastructure. Crude oil prices have fluctuated dramatically this month, influenced by Middle Eastern tensions and China’s attempts to stimulate growth.
In other commodity markets, iron ore futures remained steady just below $106 a ton, and gold prices saw a slight increase.
Key economic events to watch this week include Morgan Stanley’s earnings report on Wednesday, the European Central Bank’s rate decision on Thursday, and various US economic indicators such as retail sales, jobless claims, and industrial production also set to be released on Thursday. The week will conclude with China’s GDP data and US housing starts, alongside speeches from Federal Reserve officials.
In summary, global markets are facing significant pressures as tech stocks experience a selloff and investors recalibrate their expectations amid changing economic indicators and geopolitical tensions. Investors will be keenly watching for potential market interventions from China and the implications of central bank decisions in both Asia and the United States.