Asia report: Technology plays lead markets lower

(Sharecast News) - Asia-Pacific markets closed mostly lower on Wednesday as technology stocks sold off, tracking overnight losses on Wall Street, while renewed US strikes in Iran added to uncertainty around the fragile ceasefire.

"Global equities remain under pressure as technology stocks continue to unwind and investors turn more defensive ahead of today's US inflation report," said Patrick Munnelly, market strategy partner at TickMill.

"The MSCI Asia Pacific index fell 2.5%, its fourth decline in five sessions, while Korea's Kospi dropped 6.3% as semiconductor shares gave back more of their AI-driven gains."

Tensions in the Middle East escalated again on Tuesday evening after US forces launched strikes against Iran "in response to yesterday's downing of a US Army Apache helicopter," US Central Command said.

President Donald Trump had earlier accused Iran of shooting down the helicopter, which he said had been patrolling over the Strait of Hormuz.

Iran has not directly claimed responsibility for the incident, but the latest development threatens the fragile ceasefire between Washington and Tehran and could complicate efforts toward a peace deal.

"Oil is not offering the same kind of shock impulse it did earlier in the conflict," Munnelly said.

"Brent is now below $92 per barrel, lower than Friday's close, despite more military action after the US delivered what it described as a proportional response to Iran shooting down a US helicopter patrolling the Strait of Hormuz."

Munnelly said that suggested markets still saw the conflict as contained, "or at least not yet severe enough to disrupt flows materially".

"However, the geopolitical risk has not disappeared; it is just being outweighed for now by broader risk-off positioning and concerns over demand, policy and positioning," he added.

Asian semiconductor and technology stocks resumed their slide after a brief rebound lost momentum, with investors still concerned about stretched artificial intelligence-related valuations.

AI-related fundraising also appeared to be diverting money away from existing technology stocks.

"The key shift is that AI is no longer insulating equities from the macro backdrop," Munnelly said.

"Earlier in the year, investors were willing to buy every dip in the chip complex, treating AI capex as a structural force strong enough to offset geopolitics, higher yields and valuation concerns. That confidence has weakened."

Tech names lead bourses lower across Asia

Japan's Nikkei 225 fell 1.89% to 64,179.27, while the broader Topix declined 1.25% to 3,847.60.

Taiyo Yuden dropped 12.91%, Furukawa Electric lost 11.74%, and Sumitomo Electric Industries fell 11.71%.

SoftBank Group plunged 8.33% amid the broader technology sell-off and after efforts to secure at least $6bn through a margin loan backed by its OpenAI stake hit a snag, according to Bloomberg.

The group was exploring alternative funding options, although it may revisit the loan at a later date.

Advantest and Renesas Electronics were also in the red.

Starbucks was meanwhile exploring options for its Japan business, including a possible stake sale, Bloomberg reported, citing people familiar with the matter.

Preliminary talks had reportedly been held with investment banks over the approach for the business, with Japan among Starbucks' largest markets at about 2,100 stores.

Separately, Japanese sportswear brand Asics said it would spin off its Onitsuka Tiger sneaker brand into OT Group, a wholly owned subsidiary.

Japan also reported a sharper-than-expected rise in producer price inflation, driven by soaring energy costs.

Wholesale inflation rose 6.3% year-on-year, above Reuters-polled expectations for 5.5%, while prices increased 0.9% month on month, also ahead of forecasts for 0.5%.

Energy prices accounted for 0.21 percentage points of the increase.

"Japan remains a rate-market pressure point," Munnelly said.

"JGB futures continued to fall after a weak 30-year auction, showing that long-end supply and policy normalisation concerns are still weighing on the market."

Munnelly said that was relevant beyond Japan because higher Japanese yields could influence global duration demand, especially if domestic investors became less willing to hold foreign bonds unhedged.

In China, the Shanghai Composite fell 0.42% to 3,993.23, while the Shenzhen Component dropped 2.06% to 14,954.10.

Xi'an Bright Laser Tech declined 10.74%, Shenzhen Heungkong Holding lost 10.11%, and Fujian Longxi Bearing Group fell 10.02%.

China's wholesale prices rose at the fastest pace in nearly four years in May, driven by higher raw material costs linked to the Iran war and the artificial intelligence investment boom, while consumer inflation came in below estimates.

The producer price index rose 3.9% from a year earlier, the highest since July 2022 and ahead of forecasts for 3.8%, according to the National Bureau of Statistics.

Core CPI, excluding food and energy, rose 1.1% year on year, easing from 1.2% in April, while food prices fell 1.7%.

"China's inflation data add another useful piece to the global inflation puzzle," Munnelly said.

"CPI held at 1.2% year-on-year in May, slightly below expectations, while PPI rose sharply to 3.9% year-on-year.

"Food prices were down 1.7% year-on-year, and the widening gap between producer and consumer prices suggests the energy shock is lifting input costs but not passing fully through to consumers."

Munnelly said that was "a classic sign of weak pricing power" and implied margin pressure for firms unless external demand or policy support absorbed the squeeze.

Hong Kong's Hang Seng Index declined 0.64% to 24,407.96.

Lenovo Group fell 9.38%, Contemporary Amperex Technology lost 5.43%, and Citic Pacific dropped 4.95%.

South Korea's Kospi 100 fell 5.31% to 9,591.06 as technology names came under pressure.

Naver Corporation dropped 11.67%, Samsung SDS lost 10.89%, and LG Electronics declined 9.68%.

Sydney, Wellington buck global trend to close higher

Heading down under, Australia outperformed, with the S&P/ASX 200 rising 0.57% to 8,653.30.

Steadfast Group surged 36.2%, AUB Group gained 9.84%, and Reece added 8.57%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 rose 0.38% to 13,253.65.

KMD Brands climbed 9.33%, Tourism Holdings gained 4.82%, and Serko added 4.67%.

Dollar gains on regional peers, oil prices in the red

In currencies, the dollar was last up 0.06% on the yen to trade at JPY 160.46, as it gained 0.26% against the Aussie to AUD 1.4262, and advanced 0.06% on the Kiwi to NZD 1.7201.

Oil prices edged lower, with Brent crude futures last down 0.39% on ICE at $91.09 per barrel and the NYMEX quote for West Texas Intermediate falling 0.28% to $87.95.

Reporting by Josh White for Sharecast.com.