Asian Stocks Drop Following Wall Street Slide
Asian markets took a downturn on Friday, influenced by a significant decline on Wall Street, marking one of the most difficult days since April. The stocks of Nvidia and other key players in the AI industry faced substantial losses, raising concerns that their valuations had become excessive.
In the U.S., futures dipped while oil prices experienced a rise.
Leading the decrease was South Korea’s Kospi, which fell 3.8% to 4,011.57, driven by aggressive selling in the technology sector. Specifically, Samsung Electronics saw a 5.5% decline, while SK Hynix dropped by 8.5%. Similarly, LG Energy Solutions fell by 4.4%.
Taiwan’s Tyex index decreased by 1.8%.
Japan’s Nikkei Stock Average saw a nearly 1.8% drop, landing at 50,376.53 yen, as it reversed the previous day’s gains. SoftBank Group was a notable contributor to this decline, falling by 6.6%.
In China, Hong Kong’s Hang Seng Index decreased by 2% to 26,539.74, while the Shanghai Composite Index fell by 1% to 3,990.49.
Recent data indicated that China’s factory output rose by 4.9% year-on-year in October. This is the lowest increase in 14 months, a significant drop from September’s 6.5% and below the expected 5.5%. Moreover, investment in fixed assets, such as factory equipment, decreased by 1.7% in the January-October timeframe compared to last year. The ongoing decline in real estate investment primarily hindered capital investment.
Australia’s S&P/ASX 200 slipped 1.4% to 8,634.50, as hopes dimmed for an interest rate cut by the Reserve Bank of Australia following strong job data.
India’s BSE Sensex also fell, although only by 0.3%.
Thursday marked one of the U.S. stock market’s worst days since early spring, with investor sentiment clouded by uncertainty regarding potential interest rate cuts that many on Wall Street anticipated.
The S&P 500 index declined by 1.7%, experiencing its worst day this month and the second-worst since a sharp drop in April, following unexpected tariffs from then-President Trump.
Similarly, the Dow Jones Industrial Average dropped by 1.7% from its record set just a day prior, while the Nasdaq Composite saw a fall of 2.3%.
Nvidia, a pivotal player in the semiconductor market, significantly influenced the overall market decline with a 3.6% drop. Other AI-related stocks such as Super Micro Computer, Palantir Technologies, and Broadcom also faced notable losses.
Questions are mounting about the sustainability of valuations for AI-related companies after their meteoric rise. For instance, Palantir had soared nearly 174% this year until recently.
This remarkable performance has played an essential role in driving U.S. market records, juxtaposed against a slowing job market and persistent high inflation. However, the skyrocketing prices of AI stocks have led to comparisons with the dot-com bubble of 2000, which ultimately crashed, causing significant losses in the S&P 500.
In the broader market on Friday, non-AI stocks declined as traders expressed concerns about future federal reserve policies. Speculation is rising about the feasibility of further interest rate cuts in December.
While lower rates could stimulate the economy and boost investment, they might worsen inflation. U.S. stock prices, which had surged partly due to expectations of cuts, could drop if those cuts do not materialize.
Expectation for a third interest rate cut this year has diminished significantly, with traders estimating only a 51.9% chance, down from nearly 70% a week earlier, based on CME Group data.
Additionally, early trading on Friday saw benchmark U.S. crude oil raise by 90 cents to $59.59 a barrel, while Brent crude rose by 86 cents, reaching $63.87 per barrel.
The dollar strengthened slightly against the yen, moving to 154.55 from 154.54. Meanwhile, the euro rose to $1.1637 from $1.1635.
