(Reuters) -Equities saw their sharpest slide in seven months in Asia on Wednesday, with tech stocks leading losses as investors hit the brakes on a prolonged, artificial intelligence-driven rally.
The retreat from record highs was also fuelled by concerns that equity markets may be overstretched, following comments from the CEOs of Wall Street heavyweights Morgan Stanley and Goldman Sachs questioning the sustainability of lofty valuations.
MARKET REACTION: Nasdaq futures were down 1%, following a 2%
fall in the cash index on Wall Street overnight and indexes in South Korea and Japan have dropped more than 5% from record highs touched on Tuesday. [MKTS/GLOB]
COMMENTS:
MATT SIMPSON, SENIOR MARKET ANALYST, STONEX, BRISBANE:
"When you consider the Nasdaq rallied for seven consecutive months and added over 50% from its April low, the current selloff is a mere nudge in the grand scheme of things.
"At some point, profits need to be booked.
"But when momentum turns like it has for global markets, stops get triggered and force traders to liquidate in other markets to nurse losses - in turn prompting fresh bearish activity. Those with money on the line aren't likely seeking answers right now - they're just copying each other like kids in an exam. And the answer is to run."
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:
"It's a classic position-unwind and profit-taking day across Asia's AI and semiconductor leaders after record highs. A wobble in U.S. big tech has dented sentiment across global growth and AI names, while a sharp crypto drawdown is tightening broader risk appetite, and a firmer yen is weighing on Japan's export-heavy equities. Together, these forces are driving a healthy correction, which does not look like panic selling yet."
JASON WONG, SENIOR MARKET STRATEGIST, BNZ, WELLINGTON:
"It's probably just time to take pause on the equity market rally we've had. It's been all one-way for a while, and it's risk off now pervading markets.
"Maybe the U.S. Fed last week was a bit of a wake-up call that the path to easier U.S. policy isn't set in stone. We're overdue for a bit of a correction."
RYAN FELSMAN, CHIEF ECONOMIST, COMMSEC, SYDNEY:
"I think at the moment there's a bit of profit-taking going on. There's uncertainty around the U.S. government - we're now into the 35th day of the federal government shutdown. There are concerns we could see higher bond yields with the U.S. government eventually reopening, and higher bond yields often translates into those growth and rate sensitive type stocks such as technology coming under some pressure.
"Clearly the tech sector is priced to perfection at the moment. It's expensive and certainly investors are a little bit concerned that the market's run a bit too hard."
SHIER LEE LIM, LEAD FX AND MACRO STRATEGIST APAC, CONVERA, SINGAPORE:
"The lack of a single clear catalyst suggests that investor caution is being driven by a combination of macroeconomic uncertainties, including concerns about growth prospects, ongoing government shutdown negotiations in the U.S., and heightened scrutiny of capital expenditure in key industries."
TONY SYCAMORE, MARKET ANALYST, IG, SYDNEY:
"I think this is the start of the move ... it's probably six or seven reasons which combined have started this risk aversion selloff.
"The rally has been relentless from the April lows and combined with the CEOs warning of a correction and Michael Burry of the Big Short saying he bought downside in Nvidia and Palantir and then the (U.S) government shutdown now in the record territory - there's so many reasons now for this to sort of continue lower."
JON WITHAAR, SENIOR PORTFOLIO MANAGER, PICTET ASSET MANAGEMENT, SINGAPORE:
"It's a confluence of things but I think it comes down to positioning. Retail investors and hedge funds have been extremely exposed on the long side to technology stocks in particular globally and a combination of some negative CEO comments on valuation overnight combined with the violent downward move in crypto has damaged sentiment.
"The selloff appears to be largely positioning-driven, with recent outperforming names taking the worst of the move. In Asia, this includes names such as SoftBank and SK Hynix. Yesterday's "investment caution" on SK Hynix was certainly something that spooked retail and institutional investors."
(Reporting by Reuters' Asia markets team in Singapore, Sydney, Shanghai and Tokyo; Editing by Sherry Jacob-Phillips)
