SINGAPORE, June 8 (Reuters) — Markets across Asia continued a punishing decline that started last week, with chip manufacturing companies bearing the brunt of losses and South Korea’s KOSPI index falling more than 4.5%.
American markets dropped significantly on Friday after robust employment figures increased the likelihood of an interest rate increase this year, prompting investors to flee from some of the year’s most successful investment strategies.
Financial market experts shared their perspectives on these dramatic movements:
FRANK BENZIMRA, HEAD OF ASIA EQUITY STRATEGY, SOCIETE GENERALE, HONG KONG:
“What you see is some extreme sensitivity of the market to earnings, because what has made this market rise so much … is the fact that the earnings have been constantly revised upwards. So when you start to see some doubt on this positive earnings momentum … you see the market becoming very, very nervous.
“You have some leveraged ETFs which have been bought and by nature of the function of those structures, it is amplifying the decline … so this is creating volatility.”
THOMAS MATHEWS, HEAD OF MARKETS FOR ASIA-PACIFIC, CAPITAL ECONOMICS:
“The weaker-than-expected Broadcom result late last week has probably brought back a few of investors’ nerves around the AI trade. The U.S. labour market data and associated shift in Fed expectations wouldn’t have helped much, either. But the bigger picture is that semiconductor companies are still making lots of money and the broader economy is strong, which isn’t typically a backdrop for a sustained drawdown.”
FABIEN YIP, MARKET ANALYST, IG, SYDNEY:
“The sharp declines have been triggered by the large correction concentrated in tech last Friday in the U.S. If the optimism on the AI trade fades, it will have a toll on the picks and shovels companies in Asia. Further, the weak won and potential tightening from South Korea may potentially add strain for the leveraged positions.
“A correction following a sustained advance can be healthy for the market – for now corporate fundamentals remain solid. Risks linger, however: forced unwinding of leveraged positions could amplify near-term volatility, while upcoming inflation prints may push bond yields higher, applying additional pressure on growth stock valuations.”
MARC VELAN, HEAD OF INVESTMENTS, LUCERNE ASSET MANAGEMENT, SINGAPORE:
“The move looks more like a positioning and momentum unwind than a reassessment of the long-term AI story. Korean technology names have been among the strongest performers globally and were heavily owned, so when rate expectations shifted after the jobs report, they became a natural source of liquidity. The key question is whether hyperscaler AI spending slows. At this stage, we are not seeing evidence of that.”
