Stocks in Asia fell on Thursday as concerns over the possibility of a renewed trade war between the US and China weighed heavily on investor sentiment. The losses were particularly focused on technology and chipmaking shares, following reports of potential US restrictions on companies supplying chip technology to China.
The heightened tensions between the two countries were exacerbated by recent comments from Republican presidential candidate Donald Trump regarding US defense spending on Taiwan. This, combined with the uncertainty surrounding trade relations, kept markets on edge.
Tech-heavy indexes were hit hardest, with Japan’s market tumbling 2.1% on losses in chipmaking stocks. Tokyo Electron Ltd., Japan’s most valuable chipmaker, saw a significant drop in its stock price after reports suggested the company could face increased scrutiny from the US over its supply chain to China.
The US is reportedly considering stricter trade restrictions on China if companies like Tokyo Electron and ASML Holding NV continue supplying chip technology to Chinese markets. This move could potentially cut off China from advancements in artificial intelligence and spark a new round of retaliatory measures from Beijing.
South Korea’s market also experienced a 1.4% decline, while Chinese markets faced losses amid concerns of retaliatory actions from Beijing in response to trade tariffs imposed by the European Union. Hong Kong’s index lost 0.8% as well.
The chip industry was further shaken as Taiwan’s TSMC prepared to release its second-quarter earnings. The company, considered a bellwether for the industry, was expected to report strong earnings driven by demand for chips used in artificial intelligence applications.
Despite the positive outlook for TSMC, its stock price slid in Taiwan trade, tracking a nearly 8% drop in its US units. The sell-off was partly fueled by Trump’s comments and a broader decline in the chip sector following recent highs driven by AI hype.
ASML Holding NV, another key player in the chip industry, reported stronger-than-expected earnings as it also benefited from AI-driven demand. However, broader Asian markets retreated as sentiment soured across the region.
Australia’s market fell 0.3% after a stronger-than-expected reading on the labor market raised concerns about potential interest rate hikes. Meanwhile, futures for India’s index pointed to a weak open, reflecting the negative sentiment towards Asian markets overall.
Despite the current uncertainty, many regional markets are still trading near record highs, buoyed by optimism that the Federal Reserve will cut interest rates in the coming months. However, the ongoing trade tensions between the US and China continue to cast a shadow over the global economy, leaving investors cautious about the future direction of the markets.