TOKYO, July 17 (Reuters) - Asian markets slid sharply on Friday, with equity benchmarks in Japan and Taiwan falling as much as 6%, as a global rout in technology stocks accelerated.
Japan's benchmark Nikkei 225 gauge .N225 confirmed correction territory, down more than 10% since its all-time high close on June 25.
Analysts point to AI profit-taking, valuations and yields
"The Nikkei is highly correlated with the SOX index. The pace of the SOX's gain was unsustainable, and there's been a correction in it. A correction was anticipated, but it is happening earlier than market expectations."
"The market has become wary of whether hyperscalers can make returns that justify their massive investments. And these investments are funded by highly leveraged loans from banks and private lenders."
CHRISTOPHER FORBES, HEAD OF ASIA AND MIDDLE EAST, CMC MARKETS, SINGAPORE:
"They were good (tech) earnings. But it just shows how much was baked into the price. SpaceX is a pretty good proxy for market sentiment right now, and it's below the IPO price."
"I'm still not seeing any panic — people are buying gold and silver and those have been losing trades."
"But the reality is that the world is watching yields go higher...hence the market is selling off."
JOHAN JAVEUS, SENIOR ECONOMIST, SEB, STOCKHOLM:
"Probably a combination of factors where the selloff is partly driven by profit-taking on many AI stocks, coupled with the recurring doubts of an AI investment bubble. The fact that the SpaceX IPO has done so poorly makes many investors extra nervous."
"I think the Fed was likely a trigger. Kevin Warsh and his comments and changing views towards what appears to be quite hawkish Fed policy started a cascading effect towards taking chips off the table."
"We started to get a lot more momentum in terms of the selling pressure, first off with the very high profile names like SK Hynix and Samsung, but from there it has kind of spread."
"So the Nikkei is trending as bad, if not a little bit worse. The word 'bloodbath' is accurate because it is across the board."
FABIEN YIP, MARKET ANALYST, IG, SYDNEY:
"I think the focus now from investors is about the sustainability, not just whether the growth numbers will go up... but more about whether these numbers are achievable while still maintaining certain healthiness in the balance sheet."
"Retail investors have borrowed to trade in this really impressive AI rally, so I think the unwinding of leveraged positions will definitely exaggerate the decline as well."
"If tonight, the selloff continues into the U.S. session, I think Korea, when it reopens, is going to be quite disastrous."
SHOICHI ARISAWA, FELLOW AT INVESTMENT RESEARCH DEPARTMENT, IWAI COSMO SECURITIES, TOKYO:
"I believe the market correction is dragging on as a reaction to the sharp rise that preceded it. That said, I don't think the business environment surrounding AI and semiconductor companies, or the current outlook for semiconductor demand, has changed."
NAOKI FUJIWARA, SENIOR FUND MANAGER, SHINKIN ASSET MANAGEMENT, TOKYO:
"The market cannot trust memory makers' outlook, as demand is expected to rise, but it might be because their customers are ordering ahead of price increases... Next week we have earnings for Alphabet and others, which are memory users. If their outlook is strong, the stock market may rebound."
"If the Nikkei falls to 63,000, that means that shares trade at 17 times the PER, which is cheap relative to the current environment."
WEN XUNNENG, CEO OF ZHU LIU ASSET MANAGEMENT, IN SHANGHAI:
"The global AI bubble is bursting. The A-share correction followed pull-backs in South Korean and U.S. stocks."
"The AI industry keeps expanding, but it does not mean stocks will keep rising."
"The large number of quant funds in China are also amplifying volatility. It would take quite some time for China's tech stocks to stabilise."
SHRIKANT KALE, SENIOR QUANTITATIVE STRATEGIST, JEFFERIES, HONG KONG:
"The market is potentially beginning to discount a normalisation in earnings growth expectations for crowded AI beneficiaries, shifting from pricing near-perfect execution and perpetual upgrades toward a more sustainable growth trajectory."
ZHIWEI ZHANG, CHIEF ECONOMIST, PINPOINT ASSET MANAGEMENT, HONG KONG:
"It (correction) appears largely technical rather than fundamental. There doesn't seem to be any major change in the tech capex expectations. It is more of an adjustment of crowded positions that led to a certain state of stampede."
GARY TAN, PORTFOLIO MANAGER, ALLSPRING GLOBAL INVESTMENTS, SINGAPORE:
"From the flows we are seeing, this looks more like froth coming out of a crowded AI trade than a knee-jerk reaction to higher yields. Equity flows suggest investors are taking profits in some of the biggest AI winners rather than making a high-conviction rotation into year-to-date laggards such as software, consumer and internet names."
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