Asian stocks sink as tech profit-taking overshadows rate cut cheer

Investing.com-- Most Asian stocks retreated on Friday, with technology-heavy indexes seeing steep losses as the sector was slammed by profit-taking even as soft U.S. inflation data ramped up optimism over interest rate cuts.

Regional stocks largely tracked overnight losses in Wall Street, as heavyweight technology stocks, particularly chipmakers and stocks with artificial intelligence exposure, were slammed by profit-taking. This saw the NASDAQ Composite slide nearly 2%.

U.S. stock futures were steady in Asian trade, as focus turned to the start of the second-quarter earnings season, with a slew of heavyweight banks set to report on Friday.

Losses in stock markets came as U.S. consumer price index data read softer than expected for June, which saw traders ramp up bets that the Federal Reserve will begin cutting interest rates in September. 

Asian tech slammed by profit-taking, Nikkei slides 2%

Tech-heavy indexes in Asia, which had mostly outpaced their regional peers in recent weeks, clocked the heaviest losses on Friday. The sector saw a heavy degree of profit-taking after hype over AI sparked a major melt-up in valuations this year.

Traders were seen pivoting into other economically-sensitive sectors, which are now set to benefit from lower interest rates.

Japan’s Nikkei 225 was emblematic of this trend, slumping 2.2% from record highs hit on Thursday. The broader TOPIX, which is a lot less tech-heavy than the Nikkei, fell 0.9%. Chipmakers Renesas Electronics Corp (TYO:6723), Advantest Corp. (TYO:6857) and Tokyo Electron Ltd. (TYO:8035) slid between 4% to 7%, while tech investment house SoftBank Group Corp. (TYO:9984) lost 3.2%. 

South Korea’s KOSPI slid 1.4% with memory chip making major SK Hynix Inc (KS:000660) losing over 3%.

TSMC (TW:2330) (NYSE:TSM), the world’s biggest contract chipmaker, and a key driver of the recent tech rally, slid over 4% from record highs. 

Hong Kong outperforms on bargain buying, ASX hits record high 

But major Chinese technology stocks largely ducked weakness in their global peers, as relatively lower valuations in the sector drove in a slew of bargain hunting.

Hong Kong-listed Chinese tech majors such as Baidu (NASDAQ:BIDU) Inc (HK:9888), Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) rose over 2% each, which helped the Hang Seng index rally 2%. The index also pulled further away from a two-month low hit earlier this week.

Chinese markets fell less than their broader peers, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes treading water on Friday.

Australia’s ASX 200 outperformed its Asian peers, rising 0.9% to a record high of 7,969.10 points. The index, which has a relatively small weightage of technology stocks, was boosted by flows into economically sensitive sectors such as mining and industrials.

These sectors advanced across the board in Asia, given that they are expected to benefit from a low interest rate environment. 

Futures for India’s Nifty 50 index pointed to a flat open, with gains in industrials and consumer stocks set to offset losses in tech. The Nifty and the BSE Sensex 30 had both scaled record peaks earlier this week amid persistent optimism over the Indian economy.