Asian stocks hit by tech rout as sticky inflation ramps up Fed fears

By Ambar Warrick

Investing.com -- Most Asian stock markets sank on Wednesday after stronger-than-expected U.S. inflation readings ramped up fears of more hawkish moves from the Federal Reserve, with regional technology stocks bearing the brunt of losses.

Regional technology stocks were also pressured by Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) dumping a bulk of its shares in chipmaker Taiwan Semiconductor Manufacturing Corp (TW:2330) and increasing its stake in Apple Inc (NASDAQ:AAPL).

TSMC slumped over 3% and was the biggest weight on the Taiwan Weighted index, which tumbled 1.6%. The index was also the worst-performing Asian bourse for the day.

Other tech-heavy indexes also logged steep losses, with Hong Kong’s Hang Seng index down 1.3%, while South Korea’s KOSPI lost 1.2%.

Broader Asian stock markets also retreated, with China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes losing 0.3% and 0.4%, respectively.

Sentiment towards risk-heavy assets was soured by stronger-than-expected U.S. consumer price index data for January, which showed that inflation remained resilient despite a slew of interest rate hikes by the Fed.

The reading gives the Fed more impetus to keep hiking interest rates in the near-term, which threatens to pull foreign capital flows away from Asian markets. Regional central banks are also expected to raise rates to keep up with the Fed, limiting liquidity conditions.

The prospect of higher interest rates also increases the possibility of a U.S. recession this year, with rising short-term yields reflecting investor angst over a slowdown.

Asian stocks logged sharp losses in 2022, as the Fed embarked on an aggressive rate hike spree, and have struggled so far this year. Middling economic indicators from China also weighed on regional sentiment with the prospect of a staggered recovery in Asia's largest economy.

Japan’s Nikkei 225 index sank 0.5%, with investors remaining uncertain over local monetary policy after the government unexpectedly nominated economist Kazuo Ueda as the next Bank of Japan governor.

Ueda, seen as a wild card pick, is expected to adopt a data-driven approach to managing monetary policy, which, given rising inflation in the country, could spur tightening sooner than expected.

Australia’s ASX 200 index sank 1%, with heavyweight bank stocks weighing the most on a weak outlook from Commonwealth Bank of Australia.

CBA, the country’s largest lender, posted a record interim profit, but warned that credit conditions in the country were cooling amid high interest rates and inflation.