Asia-Pacific Stocks Slip as Wall Street’s AI Retreat Spills Over Into Regional Trading

Asia-Pacific equity markets broadly declined on Tuesday, mirroring weakness in New York where investors continued to reduce exposure to prominent artificial intelligence names.

Losses in Oracle, Broadcom and Microsoft on Monday, with the three companies shedding more than 5%, 2% and 1% respectively, set the tone for a cautious session across the region. Market participants said the pullback signaled an ongoing rotation out of high-growth technology shares that had dominated performance throughout 2023.

Australia edges higher despite softer activity data

Australia’s S&P/ASX 200 was the only major benchmark in positive territory, finishing marginally above the flatline. Gains in financials and consumer staples countered weakness among resource producers. Economic readings, however, pointed to a cooling momentum. The flash composite purchasing managers index released by S&P Global showed business activity expanding at a slower pace in December, with the headline figure slipping to 51.1 from November’s 52.6.

Japan dragged by materials and real estate shares

In Tokyo, the Nikkei 225 declined 1.14% while the broader Topix lost 1.05%. Basic materials and real estate led the retreat after a drop in commodity prices and ongoing concerns about domestic property valuations. Japan’s flash composite PMI also pointed to softer expansion, easing to 51.5 from the prior month’s 52. Manufacturing output remained below the 50-point threshold that separates growth from contraction, offsetting a modest pickup in services.

South Korea posts second straight decline

South Korea’s Kospi fell 1.58%, extending Monday’s losses, and the small-cap-focused Kosdaq slipped 1.78%. Sentiment was hit by a sharp move in Korea Zinc, whose shares plunged as much as 11.24% after local media said the smelting company agreed to sell US$1.9 billion of equity to a joint venture backed by the U.S. government and undisclosed strategic investors. Market analysts noted that dilution concerns and uncertainty over the partnership’s objectives weighed on the stock.

Elsewhere in Seoul, biopharmaceutical firm ADEL advanced in early trade but pared gains after confirming a drug-development partnership with Sanofi valued at up to US$1.04 billion. The company said milestone payments would depend on clinical progress and regulatory approvals.

Hong Kong and mainland China mixed

Hong Kong’s Hang Seng Index slipped 0.65% amid weakness in technology and property counters. Traders cited profit-taking in large internet names following a recent rebound and lingering concerns about liquidity conditions ahead of year-end. On the mainland, the CSI 300, which tracks the largest stocks in Shanghai and Shenzhen, was little changed as gains in consumer shares offset declines in financials.

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Wall Street’s AI retreat sets the backdrop

Overnight in the United States, the S&P 500 fell 0.16% after opening higher, the Dow Jones Industrial Average edged down fractionally, and the tech-heavy Nasdaq Composite lost 0.59%. The reversal followed a week-long run that had taken the S&P 500 within sight of its all-time closing high. Concerns about stretched valuations in the artificial intelligence space and a lack of fresh catalysts prompted fund managers to lock in profits.

Market strategists said the regional follow-through was to be expected given the high correlation between U.S. technology names and Asia-listed suppliers. Semiconductor equipment makers and cloud infrastructure providers across Japan, Taiwan and South Korea are often viewed as proxies for U.S. AI demand.

Outlook and key drivers

Investors in Asia will monitor a raft of year-end data releases, including final December PMIs and industrial production figures, for signs of resilience in domestic demand. Monetary policy remains another focal point. The Bank of Japan’s final meeting of the year is scheduled for next week, and speculation over potential adjustments to its yield-curve settings continues to influence bond markets.

Meanwhile, trading volumes are expected to thin as the holiday season approaches, which could amplify market swings. Analysts noted that any further weakness in AI-linked shares on Wall Street could trigger additional short-term selling pressure in Asia, particularly among semiconductor exporters.

Crédito da imagem: Stone / Getty Images