SINGAPORE: Asian stocks slid on Wednesday (Jul 29) extending a brutal selloff as anxiety about AI valuations, rising competition and spending rocked markets ahead of crucial earnings from big tech firms and a US Federal Reserve policy decision.
Oil prices jumped after fresh attacks in the Middle East shattered the relative calm of recent days in the US-Iran war as investors fret about the impact of depleting supplies on prices and global rates.
Asian chipmakers have been at the epicentre of this year’s AI-driven rally and, more recently, investor concerns about its staying power, sparking sharp market swings.
South Korea’s KOSPI fell 5 per cent, reversing earlier gains after sinking more than 10 per cent to a three-month low on Tuesday, despite strong earnings from SK Hynix.
Shares of SK Hynix fell 9 per cent as investors digested earnings that showed the chipmaker increased quarterly operating profit more than sixfold but missed lofty expectations.
„With the FOMC meeting sandwiched between major US tech earnings this week, and expectations for AI capex already elevated, investors appear to be taking some risk off the table ahead of a critical test for both AI spending expectations and market liquidity,“ said Gary Tan, portfolio manager at Allspring Global Investments.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 1 per cent after shedding 3.6 per cent on Tuesday and was set for a monthly drop of 8 per cent.
Japan’s Nikkei fell 1 per cent and is bracing for a more than 10 per cent drop in July.
Earnings from the Magnificent Seven members Microsoft and Meta later in the day will be a key test of the AI trade, particularly after Alphabet and Tesla spooked investors last week with negative cash flow reports.
Nick Twidale, chief market strategist at ATFX Global in Sydney, expects another tough day for Asian equities, while the news from the Middle East is also expected to weigh.
„I think the risk of a Fed hike will also concern investors, so rather than a more usual pre-Fed quieter market, I’ve got a feeling it could be a volatile day ahead,“ he said.
Nasdaq futures were choppy in Asian hours and were last up 0.5 per cent while European futures pointed to a higher open.
Hong Kong’s Hang Seng index rose 1.5 per cent while China’s blue-chip index was flat.