Hang Seng Index, Nikkei Index, ASX 200: Tech Sector Rout and China Woes

US Tech Sector Rout Resumes on Micron Tech Pullback

The US equity markets had a positive but choppy session on Wednesday, June 26. The Nasdaq Composite Index and the S&P 500 saw gains of 0.49% and 0.16%, respectively, while the Dow gained 0.04%.

Micron Technologies (MU) stood out. On Wednesday, Micron Tech. gained 0.88% during normal trading hours, but slid by 7.98% in after-hours trading due to lower-than-expected revenue forecasts, despite better-than-expected quarterly earnings.

RAFA Finance summed up the earnings results and forward guidance, stating,

“Guidance Isn’t as Stellar: Micron’s outlook for the next quarter wasn’t as optimistic as some analysts hoped. They’re expecting revenue between $6.8 billion and $7.2 billion, with EPS between $0.52 and $0.62.”

Concerns about the broader semiconductor market intensified selling pressure. Seymour Asset Management Chief Investment Officer Tim Seymour shared his views on Micron Tech. saying,

“I don’t think they’re going to stand alone like NVIDIA does on the AI chip side. […]. There is competition. I think this move in the stock, it’s 65-70% year-to-date, it’s 225% up from the beginning of 2023 when you couldn’t get arrested with this stock. So, to me, if there is any kind of euphoria or hyperbolic movement in AI and AI adjacency, this is the top of the list. So, they’re going to have to crush it and they’re going to have to really guide.[…]. They’re marketing HBM as the complement to AI. […]. I don’t think they are the only ones in the space.”

How do you think Micron Tech’s guidance will impact the broader tech sector?

On Thursday, the US futures signaled a testy Thursday session. The Dow mini and Nasdaq 100 mini were down 110 and 87 points, respectively, with the S&P 500 mini dropping 18 points.

While the Asian tech sector reacted to the Micron Tech forward guidance, Asian economic indicators and the Japanese Yen contributed to the losses.

Hang Seng Index and China Mainland Stocks Slide on Industrial Profit Numbers

Meanwhile, the Hang Seng Index was down by 1.50% on Thursday morning. Economic indicators from China impacted the appetite for riskier assets. Chinese industrial profits increased by 3.4% (year-to-date) year-on-year in May, following a 4.3% increase in April, which economists expected to be at 4.1%. These figures highlighted a patchy economic recovery.

The Hang Seng Tech Index (HSTECH) also saw significant declines, with Baidu (9888) and Alibaba (9988) down 1.26% and 1.24%, respectively, while Tencent (0700) fell by 0.82%. Mainland China equity markets followed suit, with Shenzhen Composite and CSI 300 falling by 0.63% and 0.61%, respectively.

Nikkei Slides on Rising Intervention Risks and the Tech Stock Rout

The Nikkei Index fell by 1.07% on Thursday morning, with the USD/JPY return to 160, fueling fears of intervention. Japan Chief Cabinet Secretary Hayashi reacted to the Yen demise, saying the government will take the appropriate steps on excessive FX moves, adding that it is important for currencies to move in a stable manner, reflective of fundamentals.

Despite better-than-expected retail sales figures from Japan, investors focused on the intervention risks. Major stocks like Fast Retailing Co. Ltd. (9983) and Tokyo Electron Ltd. (8035) declined by 2.25% and 1.77%, respectively, with Softbank Group Corp (9984) falling by 0.40%.

ASX 200 Underwater as RBA Rate Hike Risks Intensify

The ASX 200 declined by 1.13% on Thursday morning. Rising consumer inflation expectations increased investor bets on an RBA rate hike. June’s consumer inflation expectations rose from 4.1% to 4.4%, surpassing economists’ expectations of 4.3%.

These numbers followed the Australian Monthly CPI Indicator, signaling a 4.0% inflation rate in May.

On Wednesday, Bloomberg TV APAC Chief Markets Editor David Ingles reacted to the Monthly CPI Indicator, highlighting the significance of the latest consumer price trends, saying,

“After a third hotter-than-expected Australia inflation report (note this is the monthly report not the broader quarterly data set), cash rate futures and also swaps are currently attaching a near 50-50 probability of an RBA rate HIKE in September.”

The banking sector extended its losses, with National Australia Bank Ltd. (NAB) sliding by 1.90% and Commonwealth Bank of Australia (CBA) falling by 1.47%. Gold and oil-related stocks also contributed to the losses, following pullbacks in gold and Oil on Wednesday.

Conclusion and Future Outlook

As we look ahead, market participants should closely monitor upcoming economic events and corporate earnings to gauge the next moves in the global markets. For more details, refer to our economic calendar.