Asia report: Equity markets tumble on AI, chip sell-off

(Sharecast News) - Asian stock markets suffered heavy losses on Friday, tracking gains on Wall Street the previous evening, as a renewed sell-off in AI and chip stocks swept across the region.

Tech-heavy benchmark indices in Japan, South Korea and Taiwan bore the brunt of the selling pressure as investors reassessed the impact of a political shift in Washington following the mid-term elections and the prospect of potentially tighter regulation of data centre development.

"The relief rally which followed the midterm elections was soon obliterated as the possible ramifications became clear, sparking a brutal sell off across technology shares which spread across most other sectors and indeed global markets," said Richard Hunter, head of markets at Interactive Investor.

"The Democrats' new found power following the election success followed a campaign largely predicated on the populist AI backlash. Most notably, data centre development came under fire which, if implemented, could put the brakes on the AI surge, not least through reduced chip demand."

The Nikkei 225 and KOPSI both dropped 6.0% each, following heavy falls from Tokyo-listed SoftBank and Advantest and Seoul-listed SK Hynix and Samsung Electronics.

The sell-off was so severe in South Korea that a 20-minute circuit breaker suspension was put in place after the KOSPI lost as much as 8.8% early on.

Over in Taipei, world's largest contract chipmaker TSMC tumbled, pushing the TAIEX index down 4.5%.

Steep losses were also recorded in Hong Kong (-1.3%), Shanghai (-1.1%) and Singapore (-2.2%), while Australia's S&P/ASX 200 fell only 0.5%.

One bright spark was Chinese sportwear group Li Ning which rose strongly after unveiling a CNY6bn special dividend, giving the stock at a dividend yield of around 18%.