Stocks jolted by valuation fears, tech sector hit hard
Sellers were particularly harsh on both the Japanese and South Korean markets as some of the stocks of companies that had made dizzying rallies recently took a beating
Highlights:
- South Korea among biggest decliners, plunging as much as 6.2%
- Nikkei down almost 7% from Tuesday's record high
- Bitcoin, gold recover after selloff
- Wall Street CEOs question sustainability of rally
- Stocks recoup some losses later in trading session led by China
Stock markets in Asia convulsed on Wednesday as traders wrestled with a steep selloff and a surge in volatility to the highest levels in months, after valuation fears sparked a tumble on Wall Street.
Sellers were particularly harsh on both the Japanese and South Korean markets as some of the stocks of companies that had made dizzying rallies recently took a beating.
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Tokyo's stock index tumbled almost 7% from a record high reached on Tuesday, and after paring losses was last down 2.8%. South Korean shares plunged as much as 6.2% before clawing back some losses to be down 2.9%.
MSCI's broadest index of Asia-Pacific shares outside Japan was down as much as 2.3%, the most since US President Donald Trump's Liberation Day tariff announcement in early April, and last traded 0.9% lower. US e-mini futures slid 0.1% to extend losses after a 1.2% drop for the S&P 500 overnight.
"Investors are sitting on huge stock market gains, and some might have taken profits today, especially in AI-related stocks," Ed Yardeni of Yardeni Research wrote in a research report.
Concerns over high valuations
Stocks are retreating from record highs on fears equity markets may have become overstretched after the CEOs of Wall Street heavyweights Morgan Stanley and Goldman Sachs questioned whether sky-high valuations can be sustained.
Last month, banking giant JPMorgan Chase's CEO Jamie Dimon had warned of a heightened risk of a significant correction in the US stock market within the next six months to two years.
The warnings come as a surge in enthusiasm for generative AI has swept across stock markets worldwide this year, drawing comparisons to the dotcom bubble.
"At some point, profits need to be booked. Especially when we've seen repeatedly solid runs to record highs," said Matt Simpson, senior market analyst at StoneX in Brisbane. "Those with money on the line aren't likely seeking answers right now - they're just copying each other like kids in an exam. And the answer is to run."
Heavy losses in Japanese and South Korean tech stocks
In Japan, shares in SoftBank Group dived as much as 14.3% as traders digested how one of the world's biggest tech sector investors would be affected by a 2% drop in the Nasdaq Composite overnight. In Seoul, SK Hynix dropped as much as 9.2% and Samsung Electronics fell as much as 7.8%.
Chinese shares rallied following an initial dip after a private sector gauge of service sector PMI activity expanded at its slowest pace in three months.
The CSI 300 was last up 0.5% as the State Council's tariff commission said it would suspend its 24% additional tariff on US goods for one year but retain a 10% levy following last week's meeting between President Xi Jinping and US President Donald Trump.
Currency and bond markets react
The US dollar dropped against the yen but later rallied to trade flat at 153.655 after the release of minutes from the Bank of Japan's September policy meeting.
The European single currency was last 0.1% firmer at $1.1488 after hitting a three-month low following five straight days of declines.
The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, edged back after touching a five-month high of 100.25 and was last trading flat.
The yield on benchmark 10-year Treasury notes reached a low of 4.0542% compared with its US close of 4.091% on Tuesday, before edging back up to 4.0774%.
Commodities markets update
Bitcoin fell below $100,000 for the first time since June and was choppy afterwards, with the cryptocurrency last up 1.5% at $101,814.50. Gold rebounded after three consecutive days of losses and was trading 1% higher at $3,971.60 per ounce.
Brent crude was last 0.1% higher at $64.51 per barrel.
