On a Thursday when Asian markets could not decide which way to turn, the quiet unease of the moment came into view: Chinese technology companies, long the region's bright engines, were pulled down by the fear of being pushed off American exchanges that demand a particular kind of accounting transparency. Beneath that specific worry lay older and wider anxieties about lockdowns, slow vaccines, the possibility of higher taxes, and the stubborn climb of interest rates, all of which tell investors that the path to recovery is still uncertain. The market, in the end, merely hovered, waiting to lear
Asian Shares Wobble as China Tech Selloff Deepens Over U.S. Delisting and Chip Shortage Fears
On a Thursday when Asian markets could not decide which way to turn, the quiet unease of the moment came into view: Chinese technology companies, long the region's bright engines, were pulled down by the fear of being pushed off American exchanges that demand a particular kind of accounting transparency. Beneath that specific worry lay older and wider anxieties about lockdowns, slow vaccines, the possibility of higher taxes, and the stubborn climb of interest rates, all of which tell investors that the path to recovery is still uncertain. The market, in the end, merely hovered, waiting to learn whether the expected economic renewal of the coming quarter would truly arrive.
Asian markets spent Thursday swinging back and forth, unable to settle. The main disturbance came from Chinese technology shares, which fell on fears that their companies might be forced off U.S. stock exchanges, and from worries about a global shortage of semiconductors. By the close, the broad regional index was barely positive, a small figure that concealed a choppy day.
Hong Kong showed the turbulence most clearly. Its shares dropped sharply at the open, recovered, and still finished lower, with Alibaba, Xiaomi and Tencent all trading down. Elsewhere, bargain hunters picked up consumer, property and financial stocks, lifting Japan and Australia.
The threat behind the selloff is a U.S. securities rule that would remove foreign companies failing to meet American auditing standards, and require them to disclose government ties. Those rules are widely expected to hit Chinese firms. Other concerns piled on: lockdowns in Europe, stalled vaccine distribution, and possible U.S. tax increases. Wall Street also struggled, with the Nasdaq falling about 2% as tech profits were taken, even after encouraging words from Fed Chair Powell and Treasury Secretary Yellen.
All eyes remained on the 10-year Treasury yield, which rose again, and on the dollar, which hit a four-month high against the euro. Investors are waiting to see whether the economic acceleration many expect in the second quarter finally shows up, and whether rates keep climbing.
Asian markets spent Thursday swinging between gains and losses. The cause was a selloff in Chinese technology shares, driven by fears that those companies could be forced off U.S. stock exchanges, along with worries about a global semiconductor shortage. By the end of the session MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1%, a small number that hid a choppy day.
Hong Kong showed the swings most clearly. Shares there dropped sharply at the open, then recovered enough to leave the market down 0.18%. Alibaba Group Holding, Xiaomi and Tencent Holdings all traded lower. Mainland Chinese shares rose 0.08%. Elsewhere in the region, bargain hunters bought consumer goods, real estate and financial stocks, lifting Japanese shares 0.71% and Australian shares 0.24%. U.S. stock futures rose 0.25%.
The delisting worry comes from the U.S. securities regulator, which is rolling out measures that would remove foreign companies from American exchanges if they do not comply with U.S. auditing standards. The measures would also require those companies to disclose any government affiliations. The rules are widely expected to target Chinese firms.
Other concerns weighed on sentiment too: extended economic lockdowns in Europe, disruptions to coronavirus vaccine distribution, and possible U.S. tax hikes. Peter Kenny of Kenny's Commentary LLC and Strategic Board Solutions LLC in Denver said rising interest rates, uncertain tax policy and inflation worries all remain top of mind for investors. None of those themes, he said, point to a rising appetite for risk. He added that last year's big gains are now underperforming the broader market.
Wall Street had its own rough session. The Dow Jones Industrial Average slipped 0.01%, the S&P 500 lost 0.55%, and the Nasdaq Composite dropped 2.01%. Optimistic remarks from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen did not stop profit-taking in the tech sector. MSCI's gauge of global stocks still rose 0.07%.
In commodities, U.S. crude fell 1.45% to $60.29 a barrel and Brent fell 1.21% to $63.64. Both gave back part of the previous day's gains, which had followed the grounding of one of the world's largest container ships in the Suez Canal, blocking a vital shipping lane. The benchmark 10-year U.S. Treasury yield rose to 1.6330% in Asian trade, helped by positive U.S. manufacturing data.
That yield is where many investors are looking. David Kelly, chief global strategist at JPMorgan Asset Management, said they are weighing whether long-term rates have room to climb. He said the economy is primed to accelerate in the second quarter, but that the acceleration has not yet appeared, and that this is what the market is waiting for.
The dollar reached a fresh four-month high of $1.1804 per euro. Extended lockdowns and worries over the pace of vaccinations across Europe weighed on the common currency. Even Germany's reversal of a call for a strict Easter lockdown did not lift the euro. Traders now watch whether the expected second-quarter pickup arrives and whether the 10-year yield keeps rising.
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