Asian share markets declined on Friday as investors engaged in profit-taking on technology stocks and adopted a defensive stance ahead of the weekend. This caution was primarily driven by the flare-up in Middle East hostilities, with US-Iran peace talks remaining in limbo. An AI-driven rally that had significantly boosted stocks earlier in the week fizzled out after chipmaker Broadcom reported underwhelming results. Charu Chanana, chief investment strategist at Saxo, described the market sentiment as "quite a risk-off today." Broadcom's disappointing AI expectations led investors to de-risk across the entire semiconductor chain, as South Korea had been a major beneficiary of the AI memory supercycle.
The impact was widespread across Asian markets. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.6%. South Korea’s tech-heavy Kospi plunged more than 6%, with major memory chip makers SK Hynix Inc. and Samsung Electronics Co Ltd. sliding 5.4% and 2% respectively. LG Electronics also fell 6.9%. Japan's Nikkei 225 index decreased nearly 4%, with chipmakers like Tokyo Electron Ltd., Kioxia Holdings Corp., Ibiden Co Ltd., and Advantest Corp. falling between 5.7% and 8%. SoftBank Group Corp., exposed to AI through OpenAI and Arm Holdings, saw its shares slide 6.8%. TSMC, the world’s largest contract chipmaker, fell over 2% in Taiwan trade, while Chinese chipmakers Semiconductor Manufacturing International Corp. and Hua Hong Semiconductor Ltd. each fell nearly 4%. The Nasdaq 100 sank about 5%, and a gauge of chipmakers tumbled 10%.
In addition to the AI-related downturn, geopolitical concerns also weighed on investor sentiment. The Iran-backed Hezbollah militia rejected a new ceasefire in Lebanon, and Israel stated it would not withdraw troops from the country, thwarting US President Donald Trump’s peace efforts. The dollar gained 0.5% for the week due to the Middle East conflict, while the euro was at $1.1611 and sterling at $1.3421. Spot gold was down 0.2% to $4,465.23 an ounce. Investors are now awaiting the closely watched US nonfarm payrolls data, with forecasts for an 85,000 increase in employment, keeping the jobless rate steady at 4.3%. Stronger data could further narrow the odds of a Federal Reserve rate hike.
