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Chip makers lead Asian shares lower

KOSPI

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.87%, South Korea’s KOSPI shed 1.4%, while Chinese blue chips declined 0.76%

Shares in Asia again ignored record highs hit in other parts of the world to drop on Friday, weighed down by declines in chip manufacturers, though Australia bucked the trend.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.87%, and was down 1.09% for the week.

Traders say the weakness is due to worries about the potential for new regulatory crackdowns in China and the fallout from the surging Delta variant of the new coronavirus in several countries in the region.

South Korea and Thailand both reported record daily case totals this week, and increasing social restrictions in China to fight its latest COVID-19 outbreak are hurting the country’s travel and hospitality sectors.

Japan’s Nikkei was broadly flat, with declines among chip makers neutralising gains elsewhere. The yen-based MSCI Japan semiconductor index dropped 1.73%.

Morgan Stanley analysts said in a note that while prices are still rising, global semiconductor supply is catching up with demand and they expect earnings growth expectations to reverse.

South Korea’s KOSPI shed 1.4% and was set for its sharpest weekly decline since January, with Samsung Electronics dropping 3.5%, even as its Vice Chairman Jay Y. Lee, convicted of bribery and embezzlement, was released on parole.

Chinese blue chips shed 0.76%, dragged down by its local semiconductor sub-index, which declined 3.4%.

More broadly, rising regulatory and geopolitical risks are weighing on medium-term growth prospects (in China), especially in segments targeted by national reform or security effort, private bank UBP said in a note.

However, Australia’s ASX200 advanced 0.53% to a record high, lifted by healthcare and technology companies.

For the most part Australia was not directly impacted by the crackdown by Chinese authorities on the tech sector, said Kyle Rodda, an analyst at IG markets.

Overnight, MSCI’s gauge of stocks across the globe hit another record high, and the Dow Jones Industrial Average (DJIA) and S&P 500 also ended at record highs for the third straight day.

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