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Asian Tech Stocks Slump Amid US-China Semiconductor Tensions
Asian technology stocks experienced a second consecutive day of declines driven by escalating concerns over potential tighter US restrictions on semiconductor sales to China. Among the notable casualties, Japanese chip-equipment manufacturer Tokyo Electron Ltd. saw its shares drop by as much as 11%, marking its worst two-day decline since 2008. Taiwan Semiconductor Manufacturing Co. (TSMC) shares fell by up to 4.3%, while Samsung Electronics Co. of South Korea witnessed a dip of as much as 3.3%.
The downward trend across Asian tech stocks comes in tandem with similar losses among global peers following reports that the Biden administration has cautioned its allies about the possibility of stricter trade restrictions if companies like Tokyo Electron and Netherlands-based ASML Holding NV continue providing China with advanced chip technology. Additionally, global tech stocks have recently underperformed, suggesting a broader market rotation away from last year’s major drivers.
Market Sentiment vs. Fundamental Concerns
Despite the sharp declines, the Bloomberg Asia Pacific Semiconductors Index manages to maintain an upward trajectory, showing a more than 30% increase this year, even though it has dropped about 5% this week. According to Billy Leung, an investment strategist at Global X Management Co., the broad impact on share prices could be more about market sentiment rather than actual fundamental issues. He posits that ongoing trade restriction concerns might not substantially alter the market, presenting an opportunity for investors to cash in on a sector that has seen significant overperformance.
Geopolitical Tensions Add to Market Pressure
The potential for more stringent US curbs on semiconductor sales emerges against a backdrop of growing geopolitical tensions. Recent remarks by former President Donald Trump, questioning the US's responsibility to defend Taiwan, have exacerbated the pressure on TSMC especially, as they prepare to report earnings later today. This briefing is expected to address the company’s strategies for mitigating geopolitical risks, a point highlighted by Charlie Chan, an analyst at Morgan Stanley.
In related news, ASML, another key supplier to Nvidia Corp., saw its shares plummet 11% in Amsterdam on Wednesday despite strong order reports. Likewise, the Philadelphia Stock Exchange Semiconductor Index fell nearly 7%, its steepest drop since March 2020.
