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Asia equities fall amid inflation concerns

Hang Seng

Nikkei Stock Average index dropped 2.7%, Topix index slipped 2%, Hang Seng Index shed 2.4%, CSI 300 Index lost 0.9%, Kospi Index shed 1.4%, and TAIEX declined 3%

Equity bench marks across Asia fell sharply on Tuesday, as fears of higher inflation prompted investors to dump risk assets, especially highflying tech stocks.

Japan’s blue-chip Nikkei Stock Average index was one of the worst performers, at one point dropping more than 800 points, or 2.7%, while the broader Topix index also slipped 2%.

Shares in SoftBank Group dropped more than 5% while Panasonic fell more than 6%. Semiconductor-related companies also bore the brunt with Advantest, Tokyo Electron, and Renesas Electronics all trading lower.

Over 90% of the 225 shares comprising the Nikkei Stock Average declined.

Japan’s Mothers index, which includes many startups, weakened close to 3%. Companies with high price-to-earnings ratios, like online flea market app Mercari and cloud funding service Makuake, were down.

Tokyo’s stock market tumble followed a tech sell-off on Wall Street.

Tech shares led U.S. stocks down on Monday with the Nasdaq Composite falling 2.6% as funds flowed out of growth stocks, with investors bracing for higher inflation after the yied on 10-year Treasury bonds edged higher.

Rising inflation threatens the long-term revenue outlook of tech stocks, which underpins their valuation.

Record high prices for commodities, including iron ore and copper, have also triggered anxiety over inflation, leading the rest of Asian markets to also fall.

The run-up in commodity prices has stoked fears of the U.S. Federal Reserve tightening its monetary policy much sooner than expected.

Reports of China bidding up bulk commodities have “led to ever-higher inflation expectations, and despite a fall in real Treasury yields, talk of inflation is deafening,” said Chris Weston, head of research at Pepperstone Research in Melbourne.

Data on Tuesday showed China’s factory gate prices increased in April at the fastest rate in three and a half years. The U.S. consumer price inflation report due on Wednesday is also expected to show a strong gain in April.

An inflation indicator — the five-year break-even rate on U.S. Treasury Inflation-Protected Securities, or TIPS – hit its highest level in a decade.

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