Tech leads losses as Asian stocks track Wall Street selloff

Asian stocks followed a similar trend to Wall Street on Wednesday, as technology stocks faced another heavy loss due to rising bond yields, soaring oil prices, persistent inflation, and dwindling hopes for a deal to reopen the Strait of Hormuz. The decline mirrored similar losses on the US stock market, particularly affecting firms heavily invested in AI and chips.

The Middle East crisis continued to show no signs of ending, with the United States and Iran remaining steadfast, leading to heightened crude prices as traders considered the strait staying closed.

The yield on a 30-year US Treasury reached its highest level since June 2007, while 10-year yields were higher than before the first US-Israel strikes on Iran in late February. This upward pressure on government borrowing and corporate issuance further fueled the surge. Notable US tech and chip giants such as Nvidia, Intel, Micron, and Broadcom experienced significant drops, which in turn dragged the Nasdaq and S&P 500 lower.

In Asia, the Seoul Kospi, representing the AI tech rally, plummeted more than 5% as chip leaders SK hynix and Samsung suffered losses of at least 7%. Tokyo dropped more than 2%, with Kioxia falling around 10% and SoftBank underperforming as well. Other markets such as Shanghai, Taipei, Manila, Hong Kong, Sydney, Singapore, and Jakarta also witnessed declines, with losses in excess of 1%.

Higher yields would increase borrowing costs for hyperscalers, raising questions about the outlook for capital spending and the potential impact on AI infrastructure companies, according to Kazunori Tatebe of Daiwa Asset Management. The ongoing oil price rise towards US$90 a barrel has traders concerned about the possibility of a prolonged inflation shock. The Federal Reserve is under pressure to raise interest rates to combat inflation, which has remained near the bank's 2% target for five years.

Central bankers and finance heads are set to gather in Jackson Hole, Wyoming, later this month, with Fed chief Kevin Warsh's speech at the event receiving particular attention. Minutes from the bank's most recent policy meeting, due out later on Wednesday, may provide insight into the decision-makers' thinking.