Wall Street tech rout drags down Asian shares

The grim outlook triggered a steep selloff in Asian tech firms, with shares in Japan Display plummeting over 11 percent while Murata Manufacturing and TDK Corp dived as much as 8.9 percent and 8.4 percent respectively.

Asian shares skidded on Tuesday, pressured by a tech rout on Wall Street and a slump in oil prices, while political risks in Europe buoyed the dollar as investors dumped riskier assets.

Fears of a likely peak in corporate earnings growth, softening global demand and faster rate hikes in the United States have put global investors on edge over the past month, prompting them to take money off the table before year end.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.4 per cent to a 1-1/2 week low.

Japan's Nikkei dived 3.2 per cent, led by losses in electric machinery makers and suppliers of Apple's iPhone parts after three suppliers issued warnings on results, sending tech-heavy Nasdaq slumping over 2 per cent.

The grim outlook triggered a steep selloff in Asian tech firms, with shares in Japan Display plummeting over 11 per cent while Murata Manufacturing and TDK Corp dived as much as 8.9 per cent and 8.4 per cent respectively.

Taiwanese suppliers of the iPhone such as Genius, Pegatron and Hon Hai were also deep in red.

"Market participants are gradually thinking that this technology stocks boom is going to end before long," said Yoshinori Shigemi, Japan-based global market strategist at JPMorgan Asset Management.

"Lower oil prices are another headwind for U.S. stock markets, especially the energy sector."

"We are suggesting our clients to shift from any technology stocks to quality names, stocks with high return-on-equity and low leverage," Shigemi said without naming any stocks.

South Korea's KOSPI index dropped 1.7 per cent with Samsung Electronics down 2.8 per cent. Chinese shares were also in the red, with the blue-chip CSI 300 index off 0.6 per cent.

The Asia ex-Japan index is now down nearly 17 per cent this year, after a solid 33.5 per cent gain in 2017, with October the worst month since mid-2015.

"The U.S tech sector... is generally expensive, over-owned and earnings momentum is not able to keep up with lofty expectations," said Jordan Cvetanovski, portfolio manager at Pengana International Equities.

"In the case of Apple, we are now seeing evidence of a consumer that is saturated with their products and Apple’s inability to innovate sufficiently to attract new users is showing in the latest projections for...the iPhone," he added.

TRADE WAR

Investor sentiment has also been dented by the deepening trade battle between the United States and China, with Asian emerging markets suffering their largest monthly foreign outflows last month since August 2011, according to Khoon Goh, Singapore-based head of Asia research for ANZ Banking Group.

Funds returned over the early part of November on hopes that U.S.-China tensions would ease, Goh added, with the focus on a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping later this month.

"The outcome of the meeting will have an important influence on portfolio flows in Asia into the end of the year," Goh added.

Worryingly, the Trump administration is broadening its China trade battle beyond tariffs with a plan to use export controls, indictments and other tools to counter the theft of intellectual property, the Wall Street Journal reported citing sources.

Risk assets including Asian equities have also been hurt by rising U.S. interest rates. The Federal Reserve is expected to tighten policy further in December.

The Fed's San Francisco President Mary Daly said on Monday the U.S. central bank should continue to raise rates gradually with her "modal" forecast showing two to three rate hikes over the next period of time. In Europe, fears that Britain could crash out of the European Union without a Brexit deal and a growing rift over Italy's budget hit the euro and the pound, pushing the dollar's index to 97.693 against a basket of currencies, a level not seen since mid 2017. It was last at 97.581.

The euro was slightly firmer at $1.1233 after breaking below important chart support of $1.13.

The Italian government is facing a Tuesday deadline for it to submit a revised budget to the EU.

Sterling fell to $1.2825 as three straight sessions of losses took it to the lowest since Nov.1. There were still considerable unresolved issues with the EU over Brexit, British Prime Minister Theresa May said on Monday.

It was last up 0.1 per cent at $1.286.

Oil prices hovered near multi-month lows after declining for a record 11th consecutive session amid softening demand and as Trump said he hoped there would be no oil output reductions.

U.S. crude skidded 74 cents to $59.19 a barrel. Brent crude futures fell 61 cents to $69.51.

Spot gold was 0.2 per cent firmer at $1,202.9 per ounce.

(With inputs from agencies.)