Tech chills spill into Asia, as shares sink across region

By: |
September 09, 2020 12:43 PM

Troubles with Astra-Zeneca's coronavirus vaccine trial and simmering China-U.S. tensions also have rattled investors.

Asian shares, Crude oil prices, Wall Street, US benchmark, China US tensions,  coronavirus pandemic,SoftBank Group Corp, S&P 500, Astra Zeneca,latest news on asian sharesTech stocks have soared on expectations they can continue to deliver strong profit growth regardless of the economy and global health.

Asian shares declined on Wednesday after a sell-off of big technology stocks on Wall Street pulled U.S. benchmarks lower. Crude oil prices and Treasury yields also weakened. Australia’s benchmark led regional declines on Wednesday, losing more than 2 per cent. Japan’s Nikkei 225 fell 1.6 per cent.

Troubles with Astra-Zeneca’s coronavirus vaccine trial and simmering China-U.S. tensions also have rattled investors. ”At a minimum, the optimism balloon floated by vaccine hopes has sprung a sizable leak,” Stephen Innes of AxiCorp. said in a commentary.

Talk by President Donald Trump of ?decoupling? the U.S. economy from China, as the presidential campaign heats up has ramped up uncertainty as Washington seeks to limit use of U.S. technology by Chinese companies, citing national security concerns.

The relationship between the world’s two largest economies has been on edge for years, and the antagonism threatens to further undermine global growth at a time when the coronavirus pandemic has pushed many countries into recession.

Tokyo’s Nikkei 225 lost 1.6 per cent to 22,904.31 and the Hang Seng in Hong Kong dropped 1 per cent to 24,390.21.
Australia’s S&P/ASX 200 tumbled 2.3 per cent to 5,872.10 and the Shanghai Composite index shed 1.4 per cent to 3,271.79. South Korea’s Kospi fell 0.7 per cent to 2,834.59.

Among big losers in the technology sector were SoftBank Group Corp., which fell 5 per cent, Alibaba Group Holding, whose shares fell 2.5 per cent in Hong Kong and semiconductor maker SMIC. which lost 2.7 per cent. Shares also fell in Taiwan and most of Southeast Asia.

Overnight, the S&P 500 fell 2.8 per cent to 3,331.84, clinching its first three-day losing streak in nearly three months. Nearly 90 per cent of all shares were lower. Apple, Microsoft and Amazon were among the Big Tech stocks to sink more than 4 per cent, torpedoing broad market indexes. The Nasdaq composite, which is packed with tech stocks, dropped 4.1 per cent and is down 10 per cent since it set its last record high on September 2.

The Dow Jones Industrial Average lost 2.2 per cent to 27,500.89. The Nasdaq composite, which is packed with tech stocks, dropped 4.1 per cent to 10,847.69 and has fallen 10 per cent since it set its latest record on September 2.

Tech stocks have soared on expectations they can continue to deliver strong profit growth regardless of the economy and global health. The tech shares in the S&P 500 are still up nearly 23 per cent for 2020 so far, and Amazon has rocketed 70.5per cent, despite the devastation to the economy from the pandemic.

Analysts say a flurry of activity for stock options of Big Tech companies goosed the gains even further recently.
With certain kinds of options, investors can make huge profits on a stock, without having to pay for its full share price, as long as the stock’s price keeps rising. If enough of these kinds of stock options are getting sold, it can create a buying frenzy for the stock that accelerates the gains. But all that activity can unwind quickly and send prices tumbling, as it did beginning last week. Critics have long been saying that big technology stocks had shot too high, even after accounting for their strong profit growth.

Analysts have characterized the abrupt about-face as a technical correction. ”There is more talk of ‘risk-off,’ but this still feels more like an unwinding of overbought positions, rather than a generalized flight to safety,” Robert Carnell of ING Economics said in a report.

”This is an orderly if substantial decline. There are still clearly buyers on the way down.” The yield on the 10-year Treasury has fallen to 0.67 per cent from 0.72 per cent late Friday. But it’s notably higher than the 0.53 per cent on offer at the end of July.

Tesla, one of the brightest examples of Big Tech’s wild movements, surged 74.1 per cent in August but slumped 21.1 per cent on Tuesday, its worst loss since it began trading a decade ago, amid disappointment that it won’t be joining the S&P 500 anytime soon.

The company behind the S&P 500 announced the inclusion of several companies in the benchmark index, including Etsy. Some investors thought Tesla would be among them, which can create huge bouts of buying as index funds automatically fold the stock into their portfolios.

The big question for the stock market is whether the losses can stay mostly confined to the tech area, which had been soaring so quickly earlier and looked to be the most expensive part of the market. The growing likelihood that Democrats and Republicans in Washington will fail to find a deal to send more aid to unemployed workers is also dashing hopes for extra help for the U.S. economy.

Expectations that slower growth means supply may outstrip demand has dented oil prices. Benchmark U.S. crude sank lost 28 cents to USD 36.48 per barrel in electronic trading on the New York Mercantile Exchange. It slumped USD 3.01 to USD 36.76 per barrel on Tuesday.

Brent crude, the international standard, shed 25 cents to USD 39.53 per barrel. It declined USD 2.23 overnight to USD 39.78. ”The overarching reason for oil’s buckle appears to be re-emergence of US-China risks casting serious doubt on assumptions of fairly steady demand recovery.,” Hayaki Narita of Mizuho Bank said in a commentary.
In currency dealings, the U.S. dollar slipped to 105.93 Japanese yen from 106.05 yen. The euro was flat, at USD 1.1777.

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