Asian Stocks Decline Due to Chinese Concerns; Japanese Market Reacts to Chip Sell-Off

19 Sep, 2023

Asian Stocks Decline Due to Chinese Concerns; Japanese Market Reacts to Chip Sell-Off

Asian markets experienced a decline on Tuesday, primarily due to concerns regarding the Chinese property sector impacting markets in Hong Kong and Australia. Meanwhile, Japanese investors reacted to the chip sell-off as they returned from an extended weekend break.

Simultaneously, U.S. Treasury yields remained close to their highest levels in 16 years, and the dollar maintained its six-month highs. This was in anticipation of key central bank decisions, including the Federal Reserve, Bank of Japan, and Bank of England, scheduled for this week.

Crude oil prices continued to rise due to tightened supply, raising concerns about potential stagflation.

MSCI's broadest Asia-Pacific shares index fell by 0.3%, with Japan's Nikkei experiencing a 1.1% decline, driven by significant losses in chip-related stocks such as Tokyo Electron and Advantest. The sell-off in Asian tech stocks had initiated after a Reuters report revealed that TSMC had requested its major vendors to delay deliveries.

John Pearce, CIO at Unisuper, described this news as "surprising," considering the previously strong demand for semiconductors. However, he also noted indications of softness in the pipeline.

Hong Kong's Hang Seng index declined by 0.3%, with the tech stocks subindex falling by 0.7%. Chinese property stocks showed volatility, with the Hang Seng developers subindex briefly dropping by 1.2% before recovering to a 0.2% decline.

In a positive development, Country Garden received approval from creditors to extend repayment on an onshore bond, contributing to a 1% increase in its stock. However, property services provider Country Garden Services Holdings dropped by about 2% on the Hang Seng.

Mainland blue chips in China fell by 0.4%, while the property stocks subindex remained flat.

Australia's stock benchmark declined by 0.4%, primarily due to pessimism surrounding Chinese demand and the weight of sagging mining stocks.

Despite Wall Street's modest gains overnight, U.S. stock futures remained flat. In the currency markets, the U.S. dollar index, measuring the currency against six major peers, rose by 0.06% to 105.14, nearing last week's six-month peak of 105.43. The dollar also strengthened against the yen by 0.1% to 147.73, approaching the previous week's 10-month high of 147.95. Meanwhile, the euro slightly eased by 0.07% to $1.06825.

Ten-year yields remained relatively stable, slightly above 4.3%, near the level reached on Aug. 22, which was the highest since 2007. The Federal Reserve was expected to maintain rates during their two-day meeting beginning later Tuesday, although opinions differed on the possibility of another quarter-point increase by year-end. The Fed would also release its latest economic projections and rate forecasts.

Oil prices continued to climb as weak shale output in the U.S. raised concerns about a supply deficit. This was exacerbated by extended production cuts by Saudi Arabia and Russia. U.S. West Texas Intermediate crude futures increased by 1% to $92.38, just below the 10-month high reached on Monday. Brent crude futures rose by 0.3% to $94.70 per barrel.