Due to weak signals from global markets, strong pressure and all-round selling is being seen in Asian Stock Markets today. Asian indices have slipped into the red due to the sharp fall in tech stocks during the last trading session in the American market Wall Street, the sudden rise in US treasury bond yields and the impact of rising crude oil prices. The maximum weakness has been recorded in Japan’s benchmark index Nikkei 225 and South Korea’s Kospi. Due to increasing geopolitical tension globally and cautious attitude of investors regarding upcoming economic data, there is a ‘risk-off’ environment in the market.
Sentiment deteriorated due to selling on Wall Street and rise in bond yields
In the US markets, profit-booking was seen in Dow Jones, Nasdaq and S&P 500 and selling in the IT sector in the last session. Investors have lightened positions in high-valuation tech and semiconductor stocks ahead of the US Federal Reserve’s future policies on interest rates and inflation data. Additionally, a revival in US 10-year and 30-year bond yields has increased liquidity pressure from the equity market. Whenever US bond yields rise, foreign institutional investors (FIIs) shift capital from emerging and Asian markets to safer bond markets, which has a direct impact on Asian indices.
Nikkei and Kospi fall: Chip and tech stocks hit
The selloff remains widespread across major markets in the Asia-Pacific region:
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Nikkei 225 of Japan: Nikkei, the main index of Tokyo Stock Exchange, is trading down by almost 1%. Selling pressure is being seen the most in shares of semiconductor, electronics and export-oriented automobile companies. Fluctuations in the Japanese Yen and domestic inflation data have also increased traders’ vigilance.
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KOSPI of South Korea: In the South Korean stock market, Kospi is trading down by more than 1% due to weakness in tech giants and memory chip makers, while the smallcap index ‘Kosdaq’ has recorded a huge slide of more than 2%.
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China and Hong Kong markets: Hong Kong’s Hang Seng Index and China’s Shanghai Composite Index are also trading in the red in a sluggish and narrow range.
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Australian Stock Market: Australia’s S&P/ASX 200 index also remained weak due to pressure in commodity and mining stocks.
The rise in crude oil and geopolitical tension increased concerns
Another major reason for the decline in the stock market is the sudden rise in the prices of crude oil in the international energy market. Brent crude prices have risen following the ongoing uncertainty in West Asia and announcements of strict sanctions on Iran. Asian economies (especially India, Japan and South Korea) are largely dependent on crude oil imports for their energy needs. Expensive crude increases import bills, creating the risk of inflation and putting pressure on central banks to keep interest rates high.
What is the impact on the Indian stock market (GIFT Nifty)
The effect of this chaos in Asian markets is also visible on the initial signals of Indian markets. GIFT Nifty is showing a subdued and negative trend in early trade, indicating a cautious or weak opening for the domestic benchmark indices—Nifty 50 and BSE Sensex. However, strong buying by domestic institutional investors (DIIs) and improved domestic outlook of companies are expected to support the market at lower levels.