Most Asian stocks fell on Thursday, with losses centered around technology and chipmaking shares as the threat of more U.S. restrictions on China ramped up concerns over a renewed trade war between the countries.
Recent comments by Republican presidential candidate Donald Trump on U.S. defense spending on Taiwan also kept sentiment towards regional markets on edge.
Asian stocks markets a weak lead-in from Wall Street, where the S&P 500 and NASDAQ Composite plummeted on selling in chip and technology stocks. The sectors were also hit with extended profit-taking, as optimism over interest rate cuts saw investors pivot into more economically sensitive sectors.
U.S. stock index futures rose in Asian trade, recovering slightly from Wednesday’s losses.
Asian chip, tech stocks slide on concerns over US-China trade Tech-heavy indexes were the worst performers in Asia on Thursday, with Japan’s Nikkei 225 tumbling 2.1% on losses in chipmaking stocks. Tokyo Electron Ltd. (TYO:8035), the country’s most valuable chipmaker, slid over 8% after a Bloomberg report suggested the company could face more U.S. scrutiny over its supplying to Chinese markets.
The Bloomberg report said that the U.S. is considering stricter trade restrictions on China if companies including Tokyo Electron and ASML Holding NV ADR (NASDAQ:ASML) continue supplying chip technology to China.
Such a move could represent continued efforts by the Biden administration to cut China off from advancements in artificial intelligence. It could also draw severe retaliatory measures from Beijing, sparking a renewed trade war between the world’s biggest economies.
South Korea’s KOSPI slid 1.4%, while worsening sentiment towards China saw the Shanghai Shenzhen CSI 300 and the Shanghai Composite lose 0.6% and 0.7%, respectively. Chinese markets were already nursing recent losses amid concerns that Beijing could also retaliate over trade tariffs by the European Union.
Hong Kong’s Hang Seng index lost 0.8%.
TSMC set for earnings boost from AI Sentiment towards chipmaking stocks was also on edge before key second-quarter earnings from Taiwan’s TSMC (TW:2330), which are due later on Thursday.
TSMC- considered a bellwether for the chip industry- is expected to post strong earnings as it benefited from outsized chip demand due to artificial intelligence.
TSMC slid 3.5% in Taiwan trade, tracking a nearly 8% overnight slump in its U.S. units (NYSE:TSM), with the selldown being largely driven by Trump's comments and as part of a broader chip rout.
The stock was also open to profit-taking after racing to record highs over the past year, on hype over AI.
Lithographic equipment maker ASML Holding NV (AS:ASML), which is also considered a bellwether for the chip industry, clocked stronger-than-expected earnings on Wednesday, as it benefited from AI-fueled demand.
Broader Asian markets also retreated amid souring sentiment towards the region. Australia’s ASX 200 fell 0.3%, retreating from record highs as a substantially stronger-than-expected reading on the labor market pushed up concerns over higher interest rates in the country.
Futures for India’s Nifty 50 index pointed to a weak open, with worsening sentiment towards Asia setting up Indian stocks for some profit-taking from record highs.
