(Sharecast News) - Asia-Pacific markets mostly fell on Tuesday, the penultimate trading day of the year, as investors digested continued weakness in US technology stocks and rising geopolitical tensions around Taiwan.
Sentiment was weighed by renewed concerns over an artificial intelligence-driven valuation bubble after Nvidia shares dropped more than 1% on Wall Street on Monday, giving back part of last week's more than 5% gain.
Palantir Technologies, Meta Platforms and Oracle also declined, reinforcing the cautious tone across regional equities.
Stephen Innes, head of trading and market strategy at SPI Asset Management, said markets were displaying "that unmistakable late December feel where markets stop behaving like orderly auction mechanisms and start acting like a frozen lake under a sudden thaw," noting that "liquidity is thin, participation is selective, and every marginal flow leaves an outsized footprint."
Geopolitical risks added to the pressure after China announced new military drills around Taiwan on Monday.
Taiwan president Lai Ching-te said the island would "act responsibly and not escalate conflict," while warning that China's "frequent escalation of military pressure" was inconsistent with the behaviour of a responsible power.
Markets also reacted to corporate news, including a sell-off in SoftBank after it announced a $4bn acquisition of data centre investor DigitalBridge.
Innes said that into the fragile year-end backdrop had come "the mechanical grind of month and quarter-end rebalancing, with pension money quietly but relentlessly leaning on US equities after a year where stocks outran bonds by a wide margin," adding that when such flows hit in a holiday-shortened week, "price action stops being about narrative and starts being about plumbing."
Tokyo benchmark falls on mixed day for Asia
In Japan, the Nikkei 225 fell 0.37% to 50,339.48, with losses led by Sumitomo Metal Mining, which slid 4.76%, Rakuten Group, down 2.71%, and Japan Steel Works, which fell 2.36%.
SoftBank Group shares slipped 1.9% after the company said it would buy DigitalBridge as part of its artificial intelligence strategy, with chief executive Masayoshi Son saying the deal "will strengthen the foundation for next-generation AI data centers" and advance SoftBank's ambition to become a leading "Artificial Super Intelligence" platform provider.
Shares of DigitalBridge jumped about 10% following the announcement.
The broader Topix index declined 0.51% to 3,408.97.
Innes said the pressure was most evident in areas "that need confidence and fresh risk appetite to keep levitating," adding that "consumer discretionary, tech, and materials were the first to wobble," while more defensive parts of the market absorbed flows.
Mainland Chinese markets were mixed - the Shanghai Composite was flat, down 0.004% at 3,965.12, with Anji Foodstuff, Baida Group and Fujian Dongbai Group all falling the maximum 10%.
The Shenzhen Component rose 0.49% to 13,604.07.
In Hong Kong, the Hang Seng Index outperformed, rising 0.86% to 25,854.60, driven by strength in technology and energy stocks.
Baidu surged 8.9%, while SMIC gained 4.24% after announcing plans to acquire the remaining 49% stake in Semiconductor Manufacturing North China for CNY 40.6bn (4.28bn), through the issue of 547.2 million A-shares.
CNOOC added 3.97% after unveiling the Qinhuangdao 29-6 oilfield discovery in the Bohai Sea, with proven in-place volumes exceeding 100 million tons of oil equivalent, or around 730 million barrels.
South Korean equities edged lower, with the Kospi down 0.15% at 4,214.17.
TMC plunged 16.91% and Inscobee dropped 14.11%, while battery materials maker L&F fell 9.85% after Reuters reported that the value of its 2023 supply agreement with Tesla had been cut sharply to $7,386 from an earlier projection of $2.9bn.
According to Reuters, analysts cited slower electric vehicle demand and difficulties ramping up production of Tesla's 4680 battery cells as factors behind the reduced volumes.
Innes said the broader equity wobble had seen "small caps and the Nasdaq lag and, in doing so, give back most of the Santa gains," adding that volatility had picked up but still looked like "positioning noise rather than fear."
Sydney in the red as Wellington manages gains
Australian shares were marginally weaker, with the S&P/ASX 200 down 0.1% at 8,717.10.
Liontown Resources slid 4.78%, Objective Corp fell 4.28% and Newmont Corporation declined 4.08%.
In contrast, New Zealand's S&P/NZX 50 rose 0.16% to 13,548.13, supported by gains in Synlait Milk, up 3.23%, Pacific Edge, which climbed 2.78%, and NZX, which advanced 2.6%.
Innes said bond markets were sending a calmer signal, with duration catching a bid and "the front end outperforming, which fits with a market that is not panicking about growth but is happy to park risk temporarily."
Dollar weaker against regional peers as oil prices rise
In currency markets, the dollar weakened modestly, last trading down 0.15% on the yen at JPY 155.83, as it lost 0.25% against the Aussie to AUD 1.4902 and slipped 0.1% on the Kiwi to change hands at NZD 1.7212.
Innes said foreign exchange was "the dog that did not bark," adding that "when FX goes quiet while everything else flails, it usually tells you this is not a macro shock."
Oil prices edged higher, with Brent crude futures last up 0.52% on ICE at $62.26 per barrel, and the NYMEX quote for West Texas Intermediate rising 0.5% to $58.37.
Reporting by Josh White for Sharecast.com.
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