Stock market today: Asian shares track Wall St decline, as selling hits tech companies

Asian shares fell on Wednesday, tracking a Wall Street decline as a renewed rise in Treasury yields hurt technology stocks, while caution over an expected rise in interest rates dented sentiment across the region.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.68%, extending its losing streak to a third day.

Japan’s Nikkei 225 fell 1.59%, with technology heavyweights SoftBank Group Corp and Tokyo Electron Corp tumbling more than 2%.

China’s blue-chip CSI300 index lost 0.73%, while Hong Kong’s Hang Seng index slipped 0.87%. South Korea’s KOSPI retreated 1.32%.

Wall Street tumbled overnight, with the tech-heavy Nasdaq closing 3.3% lower after Federal Reserve Chair Jerome Powell reiterated on Tuesday that inflation was unacceptably high and signaled more aggressive rate hikes were to come.

The 10-year US Treasury yield climbed above 3.00%, touching a three-week high. Higher yields make future earnings worth less, which hits valuations for high-growth companies.

“With US inflation hotter than anticipated and Fed rate hikes becoming more aggressive than previously forecast, this is leading to a re-rating of global equities,” said Steven Leung, executive director of research at UOB Securities in Hong Kong.

“The re-rating will likely continue as we move towards the FOMC meetings later in the month and September,” he added.

On Wednesday, benchmark stock indexes in Asia-Pacific that were heavily exposed to the technology sector, such as Taiwan’s TAIEX, dropped sharply. The TAIEX fell 1.57% in afternoon trade.

Yields in the region also edged higher. Japan’s 10-year government bond yield, which has been anchored around 0% for years, climbed to its highest since November 2014.

“While yields are increasing across the board, the key issue remains the relative valuations of stocks, especially in Asia which remain relatively elevated on a long-term perspective,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.

Investors are concerned that the aggressive monetary policy tightening by central banks to combat surging inflation may trigger a recession.

The global central bank cycle, including in the United States, Europe, Japan, and the United Kingdom, is a dominant factor affecting risk sentiment in equity markets, said Justin McQueen, head of investment strategy at Tribeca Investment Partners.

“Equity valuations are still elevated when adjusted for higher discount rates due to rising rates,” McQueen said.

However, analysts pointed out that with economic growth slowing, investors were becoming more discerning about valuations.

“Given economic growth forecasts are being downgraded globally, we would argue there’s no longer a ‘growth is a sufficient shield’,” analysts at Barclays said in a note.

In currency markets, the yen fell to a 24-year low of 134.65 yen per dollar, while the Korean won weakened past the key psychological barrier of 1,300 to the dollar for the first time since 2009.

In commodities markets, US oil prices rose on Tuesday, but fell early Wednesday on expectations of higher interest rates, with Brent crude futures slipping to $111.86 per barrel.

Gold, seen as a safe-haven asset, edged lower in early Asian trade, but pared losses to trade up by about 0.15%.